Directors Report of Power Grid Corporation of India Ltd.

Mar 31, 2015

To, Dear Shareholders,
Ladies & Gentlemen,

The am delighted to present on behalf of the Board of Directors, the
26th Annual Report on the performance of your Company during the
financial year ending March 31, 2015 together with Audited Financial
Statement, Auditors'' Report and Review of the Accounts by the
Comptroller and Auditor General of India for the review period.

Financial year 2014-15 marked the completion of 25 glorious years of
your Company. In this ''Silver Jubilee'' year, it maintained its growth
momentum and saw a number of splendid achievements on all fronts.

In the area of project execution, your Company recorded a
capitalization of Rs. 21,760 Crore, which is the highest ever in a
single financial year of its history. The Company''s meritorious
performance and continuous thrust on commissioning of transmission
assets has resulted in higher revenue & earnings, thereby added value
for its stakeholders. The successful addition of transmission assets
has facilitated seamless power transfer in the Country. A strong and
highly integrated inter-State transmission system has enabled
development of the vibrant power market and provided momentum to growth
of the power sector.

Your Company commenced implementation of Green Energy Corridors across
the Country, giving boost to renewable generation by facilitating its
integration with the National Grid, displaying the Company''s efforts
towards realization of sustainable and inclusive growth. In the area of
operational excellence, ''National Transmission Asset Management Centre
(NTAMC)'' and ''Enterprise Resource Planning (ERP)'' have been
operationalized. These state-of-the-art technological advances have
enabled increased transparency & efficiency in asset management and
facilitated remote visibility & operation of POWERGRID''s transmission
system established across the Country.

Your Company has been given ''Navratna'' status by Govt. of India and it
continued to display "Excellent" performance by exceeding most of the
targets under the ''Memorandum of Understanding (MoU) signed with
Ministry of Power (MoP), Government of India for FY 2014-15''. Based on
its performance against the MoU targets, the Company is poised to be
rated ''Excellent'' for the year 2014-15, thereby maintaining the record
of the getting ''Excellent'' rating year after year over two decades
since signing of its first Moll.

Major achievements by your Company on various fronts are mentioned
below:

- During the year, inter-regional power transfer capacity of 4,200 MW
has been added by the Company. The cumulative inter-regional power
transfer capacity of the National Grid stood at about 46,450 MW at the
end of March, 2015.

FINANCIAL PERFORMANCE

(Figures in Rs. Crore, except per share data)

Description 2014-15 2013-14 Y-o-Y Growth

Revenue

Transmission Charges 16,521 14,327 15.3%

Consultancy-Sale of Services 381 333 14.4%

Consultancy-Sale of Products 0 294 -

Telecom 275 276 -0.4%

Other Income 603 491 22.8%

Total Income 17,780 15,721 13.1%

EBIDTA 15,354 13,427 14.4%

Profit After Tax (PAT) 4,979 4,497 10.7%

Earnings per Share (Rs.) 9.52 9.36 1.7%

Book Value per Share (Rs.) 72.71 65.78 10.5%

Gross Fixed Assets 118,264 96,504 22.5%

Long term borrowing* 93,845 80,470 16.6%

Net Worth 38,037 34,413 10.5%

Debt Equity Ratio 71:29 70:30 -

- including current maturities of long term borrowings

OPERATIONAL EXCELLENCE

Asset Management

As on April 1, 2015, the transmission assets owned and operated by your
Company stand 115,637 ckm. of Extra High Voltage (EHV) transmission
lines and 192 nos. EHVAC & High Voltage Direct Current (HVDC)
sub-stations with 231,709 MVA transformation capacity.

Managing such widely spread assets across the Country has been an
extraordinary task involving meticulous planning and observing
stringent procedures. Maintenance activities are planned well in
advance and an "Annual Maintenance Plan" is chalked out for every asset
through live line or shutdown maintenance, as per technical
feasibility. In the event of tower damage due to natural calamities or
otherwise, Emergency Restoration System (ERS) is being used for
restoration of damaged transmission towers in shortest possible time.
Further, POWERGRID has taken initiative for development of mobile
sub-station (truck mounted) for emergency restoration in case of
eventuality.

In spite of the challenging conditions, during the FY 2014-15, your
Company maintained availability of the transmission network at 99.87%
which is comparable to international standards. The number of tripping
per line (unplanned) stood at 0.53 for the year, indicating high
reliability of POWERGRID transmission system. This performance could be
maintained through training, deployment of advanced techniques
including use of helicopters for live line aerial patrolling, hot line
maintenance upto 765 kV voltage level, equipment conditioning
monitoring including dynamic testing, thermo-vision scanning, frequency
response analysis of the transformers and reactor''s etc.

With rapid increase in asset base of your Company, urgent need was felt
to provide expert handling to the equipment spread all across the
Country. In view of this, National Transmission Asset Management Centre
(NTAMC) has been established for remote operation and monitoring of the
substations, which is manned by experts on 24X7 basis to provide expert
handling to system & equipment. The project constitutes of three
distinct areas such as SCADA (Supervisory Control and Data Acquisition
System), for gathering of electrical data & control of the switchgear
of sub-station, RAS (Remote Accessibility System) and VMS (Video
Monitoring System) which can be remotely controlled from the NTAMC and
which is used to keep a close watch on the substation switch yard & its
premises.

At the end of FY 2014-15, 75 substations are being operated through
remote operation including 44 substations without operating staff. MSH
(Maintenance Service Hub) facility has been established where
specialised group of experts of all areas like control & protection,
switchyard equipment, transformer & reactor are available to carry out
repair/overhauling of equipment as & when required.

International Benchmarking of POWERGRID O&M practices

In order to improve further, POWERGRID O&M practices are regularly
being benchmarked internationally through "International Transmission
Operation and Maintenance Study" (ITOMS) carried out by UMS, USA. In
ITOMS studies/ benchmarking, about 28 large Power Transmission
Utilities across the Globe participate and their performances are
evaluated and benchmarked. POWERGRID carried out benchmarking of all
its 9 Regions with each other and with other member Utilities of ITOMS
to identify areas of improvement. As per ITOMS benchmarking, your
Company has been maintaining high performance in its sub-stations &
transmission lines operations.

Disaster Management

Being a sound customer centric organisation, your Company has been
contributing in restoration of power in areas hit by natural calamities
in the Country. This was evident when the State of Jammu & Kashmir
(J&K) saw the devastating flood in its history of last 60 years,
disrupting the electricity supply in most of the areas of the State.
For quick restoration of power in the State, your Company took charge
as Nodal Agency to assist J&K Power Department by taking immediate
measures such as deployment of manpower, tools & tackles for
restoration of flood affected distribution system, diversion of the
material to J&K from far-flung States, deployment of Emergency
Restoration System (ERS), quick procurement of Distribution
Transformers, etc.

Yet again, when unseasonal torrential rainfall caused flood like
situation in the State of J&K, landslides were reported at various
places and tower collapse was reported in 132 kV Salal-Jammu
transmission line. Immediate dispatch of ERS was arranged and erection
carried out in a very short time.

Similarly in Andhra Pradesh in October, 2014, after cyclone ''HUDHUD'',
support was provided to restore power in the affected areas of three
(3) districts, namely Vishakhapatnam, Srikakulam & Vijayanagaram.
Wide-spread damage in these three districts had taken place on account
of tripping of lines connecting to the area from Khammam, Vijayawada,
Vemagiri, in AP and 400kV in feed from Jeypore ( Odisha).
Approximately, 1000MW load had crashed due to failure of downstream
sub-transmission & distribution network of AP Transco & Discoms in
above three districts. Besides, towers collapse was reported in a
number of 400KV & 220KV transmission lines in the area and number of
bay equipment at 400kV Gazuwaka (POWERGPJD), Simhadri (NTPC) & Kalpaka
(APTRANSCO) were also damaged. A team comprising senior officials was
sent to site immediately to restore the damaged system. Restoration of
distribution system was also carried out.

Your Company''s actions have been lauded by everyone including media and
Government, which has further boosted the determination to be ready to
face such calamities.

PROJECT IMPLEMENTATION

Your Company has been putting continuous thrust on commissioning of its
transmission projects to extract maximum commercial benefits through
its Integrated Project Management and Control System (IPMCS).

On project implementation front, your Company has commissioned about
8,830 ckm of EHV (Extra High Voltage) transmission lines and 25,786 MVA
transformation capacity with 8 new sub-stations during the year, which
includes a number of large projects, including important elements such
as 765 kV D/C Wardha-Aurangabad lines 1 & 2, 765 kV D/C Raipur-Wardha &
765kV Champa-Raipur lines for evacuation of power from IPP Projects in
Chhattisgarh, 765 kV D/C Nellore-Kurnool, 765kV D/C Kurnool-Thiruvalam
for Southern Region Grid Strengthening, 765kV S/C Satna-Gwalior-II &
765kV 2xS/C Angul-Jharsuguda transmission lines. Also, through
commissioning of 765kV D/C Jharsuguda- Dharamjaygarh line, 4,200 MW
inter-regional power transfer capacity has been added by your Company.

Also, your company has provided active support in the completion of
critical 765kV Raichur-Solapur circuit-2 transmission line, which was
being implemented through Private Sector participation.

FINANCIAL MANAGEMENT

In the FY 2014-15, your Company continued to show exceptional
performance in all its business areas, enhancing the value for the
shareholders. Your Company has achieved turnover of Rs. 17,780 Crore
and Profit after Tax (PAT) of Rs. 4,979 Crore as compared to Rs. 15,721
Crore and Rs. 4,497 Crore respectively during FY 2013-14 on standalone
basis.

In line with its increased target of Rs. 1,10,000 Crore from Rs.
1,00,000 crore capital expenditure target for the XII Plan, Capital
investment (CAPEX) of Rs. 22,456 Crore has been made during the year
2014-15 and cumulatively Rs. 65,651 Crore CAPEX has been achieved. For
the CAPEX of FY 2014- 15, Rs. 13,014 Crore were mobilised through
private placement of bonds & term loan, Rs. 3,070 Crore were mobilised
through External Commercial Borrowings (ECB)/Suppler credit and balance
Rs.6372 crore was met through internal resources generated & FPO
proceeds.

Dividend Payout

For FY 2014-15, your Company has proposed a final dividend of Rs. 1.31
per share in addition to Rs. 0.69 per share of interim dividend paid
in March, 2015. The final dividend shall be paid after your approval at
the Annual General Meeting. Thus, the total dividend payout for the
year amounts to Rs. 1,046 Crore (including an interim dividend of Rs.
361 Crore).

Particulars of loans, Guarantees or investments.

Loans, Guarantees or investments under Section 186 of the Companies
Act, 2013 form part of the notes to the financial statements provided
in this Annual report.

Particulars of contracts or arrangements with related parties

Particulars of contracts or arrangements with related parties referred
to in Section 188 (1) of the Companies Act, 2013, in the prescribed
Form AOC-2, are given as Annexure X of the Directors'' Report. Further,
attention of the members is drawn on Note No. 2.47 of the Financial
Statement which sets out related party disclosure.

Transfer to Reserves

Your company has proposed to transfer Rs. 2400.00 crore to the general
reserve and an amount Rs. 1763.00 crore to other reserves.

Statement containing salient features of financial statements of
subsidiaries, associate and Joint Ventures Companies as required under
Section 129 (3) of the Companies Act, 2013, in the prescribed Form
AOC-1, is given as Annexure XI to the Director''s Report.

Consolidated Financial Statement

As per the requirements of the Companies Act, 2013, the Audited
Consolidated Financial Statement is provided in the Annual Report.

(a) in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;

(b) the Directors had selected such Accounting Policies and applied
them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the company at the end of the financial year and of the profit of
the Company for that period;

(c) the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the Annual Accounts on a going concern
basis; and

(e) the Directors, had laid down internal financial controls to be
followed by the Company and that such internal financial controls are
adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with
the provisions of all applicable laws and that such systems were
adequate and operating effectively.

COMMERCIAL PERFORMANCE

As per Central Electrical Regulatory Commission (Sharing of inter-State
Transmission Charges and Losses) Regulations, 2010, your Company as the
Central Transmission Utility (CTU) of the Country, has been entrusted
the responsibility for billing, collection & disbursement of
transmission charges bills on behalf of all Inter-State Transmission
System (ISTS) Licensees. In this regard, bills on transmission charges
are prepared, raised and uploaded on the website portal for Designated
ISTS Customers (DICs), including the payment details by the customers.

Your Company is fulfilling the assigned responsibilities effectively
and displayed excellent collection efficiency of 97%.

PERFORMANCE AGAINST COMPETITION

Your Company is able to do well in spite of stiff competition and
displayed impressive performance under Tariff Based Competitive Bidding
(TBCB). During the year FY 2014-15, your Company won three out of four
projects put up for bidding under the TBCB route, namely Transmission
System Strengthening associated with Vindhyachal-V, Transmission System
associated with Gadarwara STPS (2X800 MW) of NTPC Part-A and
Transmission System associated with Gadarwara STPS (2X800 MW) of NTPC
Part-B. As on 31.3.2015, your Company has won total eight (8) projects
through TBCB since its participation.

DEVELOPMENT OF NATIONAL GRID

A strong National Grid enables seamless power flow across the regions
and optimum utilization of resources across the Country. Working in
this direction, your Company successfully achieved ''One Nation-One
Grid-One Frequency'' in the year 2013-14. During the year under
consideration, the Company commissioned 765kV D/c
Jharsuguda-Dharamjaygarh transmission line, increasing the power
transfer capacity between Eastern Region and Western Region by 4,200MW.
As a result, the total inter-regional power transfer capacity of the
National Grid stands at 46,450 MW as on March 31, 2015. Also to
increase the inter-regional power transfer capacity of the National
Grid, your Company is executing a number of projects, some of which
include high capacity HVDC links. By the end of XII Five Year Plan, it
is expected that the inter-regional power transfer capacity of the
National Grid will be about 72,250 MW.

GRID MANAGEMENT AND OPEN ACCESS

Power System Operation Corporation Limited (POSOCO), a fully owned
subsidiary of your Company, has been managing the national grid
successfully. POSOCO, through National Load Despatch Centre (NLDC) and
Regional Load Despatch Centres (RLDCs) has been facilitating transfer
of power through bilateral and multi-lateral transactions and is
playing important role for creating vibrant electricity market in the
Country. POSOCO has been designated as the nodal agency for Renewable
Energy Certificate (REC) Mechanism, transmission pricing, Short Term
Open Access (STOA) in transmission, Deviation Settlement Mechanism,
Power System Development Fund (PSDF) management, etc.

During FY 2014-15, to meet the demands in the Country, about 84.36
Billion Units (BUs) of inter-regional energy transfer was facilitated,
across the nation using pan-India inter-regional transmission links.

Under Short Term Open Access (STOA), 12,106 nos. of bilateral
transactions and 25,942 nos. of collective transaction were approved,
allowing energy transfer of 52.55 BUs through bilateral transactions
and 28.38 BUs through collective transactions, totaling up to 38,048
approved transactions and 80.93 BUs of approved energy in the FY
2014-15.

Further, your Company, as Central Transmission Utility (CTU), is the
nodal agency for processing & grant of Connectivity, Long Term Access
(LTA) and Medium Term Open Access (MTOA) to various applicants. Out of
209 Connectivity applications for about 2,10,000 MW capacity received,
Connectivity was granted to 90 numbers. of eligible applications of
77,600 MW capacity. As on March 31, 2015, the Company granted LTA to
201 applications of 152,000 MW capacity. Also based on the transmission
margins availability, the MTOA was granted to 76 numbers. of
applications of 5,100 MW capacity.

QUALITY MANAGEMENT

With the present state of economy & financial issues, the manufacturers
are facing tough competition from indigenous as well as international
manufacturers. To ensure quality while procuring goods at competitive
prices, various quality assurance improvement measures have been
initiated and implemented to get better quality products.
Process/surveillance audits were carried out to create win-win
partnership with suppliers and to get better quality products at low
costs.

With vast geographical spread of work & large number of high capacity
transmission lines and sub-stations with state-of-Art technology under
implementation, capacity building is one of the major challenges. In
this direction, your Company has established its ''POWERGRID Academy of
Leadership'' at Manesar for capacity building of its staff as well as
for power sector-domestic & international. Further, to have
self-reliance of indigenous development of High technology / critical
products, your Company has mandated its international suppliers to set
up manufacturing facilities in India in the field of 765kV
Transformer/Reactors, 800kV HVDC equipment, GIS & major equipment, etc.

Your Company continues to do process audits in the manufacturing units
of various vendors, sub-vendors & even further below in supply chain to
achieve the target of zero product inspection. Activities like
calibration of key testing instruments & their validation were
undertaken on topmost priority so as to improve quality systems at the
manufacturer''s works. Quality audits at sites were also undertaken
during the year for instant feedback and to take appropriate corrective
action apart from web based feedback system.

In order to ensure quality of product with required technical
specifications and to meet project completion target, a number of
activities have been undertaken by your Company like defining proper
processes for quality manufacturing, quick approval of quality plan of
various items and smart inspection of materials. For on time issue of
CIP (Customer Inspection Points) /MICC (Material Inspection Clearance
Certificate), testing and manufacturing of various critical items,
continuous follow up with manufacturers were undertaken.

Another milestone was achieved during the year when two of the Regional
Offices of POWERGPJD, i.e. Nagpur (Western Region-I) & Shillong
(North-East Region) were awarded certification for their Energy
Management Systems under ISO 50001.

Your Company developed and maintained systems and procedures aligned
with integrated management system comprising ISO 9001: 2008 for Quality
Management System, ISO 14001: 2004 for Environmental Management System
and OHSAS 18001: 2007 for Occupational Health and Safety Management
System. The certification has been maintained upon rigorous audits by
BSI Management Systems.

TECHNOLOGY DEVELOPMENT

Your company gives priority to research and development activities with
potential for environmental, social and national interests by
incorporating advanced technology solutions in the field of power
system. In this direction, your company is setting up State-of-the-Art
research and testing laboratories POWERGRID Advanced Research and
Technology Centre at Manesar in the field of transmission, renewable
integration, power system simulation, material science, advanced
equipment diagnostics, smart grid, energy efficiency, control and
automation, engineering design etc. This R&D centre shall cater to the
research needs of POWERGRID and the country as a whole as well as
capacity building of various stakeholders in this field.

The focus areas in development of transmission system across the
country and trans-country as well are conserving the Right of Way
(RoW), minimizing impact on natural resources, indigenization of
technology and maintaining high network availability. To address these
aspects, your company has developed new type of tower design including
multi circuit type, digital substation through process bus
architecture, air core reactor suitable for HVDC terminal etc.

Further, your Company as a part of its technology development process
is carrying out a demonstration project on High Temperature
Superconductor (HTS) cable system at 220kV voltage level. Being a
technology in its development and demonstration stage worldwide, which
is known for bulk power transmission with negligible losses on reduced
right-of-way, the first-hand experience gained from this R&D project
will boost your company''s thrust towards adoption of cutting edge
technologies for safe, secure and reliable operation of grid. The
operational experience and maintenance know-how gained from the project
will pave way for future deployment of this state-of-the art technology
in Indian grid.

Your company is considering a pilot project on Fault Current Limiter.
The search for a solution to address the issue of rising fault current
levels in Indian grid and at the same time which doesn''t affect the
reliable operation of the grid leads your company to advanced fault
current limiters. These Fault Current Limiters offer a promising
solution to tackle the rising fault levels with its unique features in
comparison to conventional methods for fault current limitation viz.
bus splitting, series reactors etc.

Towards maintaining high network availability by maintaining proper
insulation level of EHV transmission line, pollution measurements on
pan India basis is being carried out to create base line pollution
mapping data facilitating review of EHV lines insulation requirement
which is first of its kind in the country.

SMART GRID TECHNOLOGY

Your company has pioneered for development of Smart Grid leading
towards Smart City in the country for bringing efficiency encompassing
entire power supply value chain.

Your company is implementing one of the world''s largest Wide Area
Measurement System(WAMS) through deployment of State-of-the- Art Phasor
Measurement Units(PMU) as part of Smart transmission. It covers
deployment of PMUs at all 400kV and above substations at State and
Central level as well as generation switchyards of 220kV & above across
the country as part of Unified Real Time Dynamic State
Measurement(URTDSM) scheme. Real time measured system information using
fibre optic communication network are to be integrated at State Load
Despatch Centres(SLDC), Regional Load Despatch Centres (RLDC) and
National Load Despatch Centre(NLDC) for improved visualization and
enhanced situational awareness of system operators and planners.
Analytics using above data are being developed in association with IIT,
Bombay to enhance the efficiency & security of the overall grid
management.

Towards smart distribution, after demonstration of various Smart Grid
attributes at Puducherry in a comprehensive manner through open
collaboration, your company is also extending services for
implementation of Smart Grid projects in various states like Himachal
Pradesh, Punjab, West Bengal, Tripura, Chhattisgarh, Rajasthan,
Haryana, Karnataka and Puducherry. Your company has also submitted
project report to Govt. of Haryana on development of smart grid
leading towards smart city Gurgaon to provide 24x7 quality power
including catering growing demand and make Gurgaon Diesel generator set
free city.

Towards facilitating increasing penetration of renewables in the
overall generation capacity portfolio, your company has pioneered in
implementation of battery energy storage systems of about 1 MW capacity
as pilot project in Puducherry to evaluate different battery and its
control technologies for proof of concept, areas of application, policy
advocacy etc. in Indian context for large scale deployment.

Quality of power is one of the major concerns now in India for
performance improvement of process and maintaining health of electrical
network equipment. Recognizing its importance, your company has taken
initiative to measure various power quality parameters at different
cities on pan India at all voltage level to create base line data
repository for identification of mitigating measures and application of
technological solutions. Already measurements at more than 150
cities/towns completed across the country.

To bring awareness about Smart Grid technologies and its demonstration
in a holistic manner, your company is establishing a Smart Grid
Knowledge Center equipped with working model of various technologies at
POWERGRID Advance Research and Technology Centre (PART) at Manesar.
This shall facilitate dissemination of knowledge on smart grid
technologies in a learning environment as well as capacity building of
utility/consumer and other stakeholders.

Your company also operates Secretariat of the prestigious "India Smart
Grid Task Force(ISGTF)" of Ministry of Power, Govt. of India for
activities related to Smart Grid.

GRID INTEGRATION OF RENEWABLE ENERGY SOURCES

Integration of Renewable Energy(RE) sources into the grid is one of the
top priority of Govt. of India towards energy security and
environmental sustainability. In this direction, your company has
evolved Green Energy Corridors comprising intra state and inter state
transmission infrastructure to facilitate integration of envisaged
renewable capacity addition of about 33 GW in 12th plan in RE resource
rich states at an estimated cost of about Rs. 38,000 cr. Inter State
Transmission System(ISTS) as part of Green Energy Corridors is being
implemented by your company. Further, your company has also evolved
transmission schemes for integration of proposed ultra mega solar power
parks of about 22,000MW in various states as part of Green Energy
Corridors-II. Govt. of India also assigned your company to develop
Inter State transmission system for nine(9) solar parks of capacity
about 10,000 MW in seven(7) states. Implementation of transmission
scheme for one(1) solar park in Andhra Pradesh is under progress.

ENERGY EFFICIENCY

Energy conservation through energy efficiency measures plays an
important role to address energy saving aspect towards sustainability.
Your company initiated activities in identification of energy saving
opportunities through carrying out energy audits of various industries
including Integrated Steel Plant at Bokaro & Bhilai, SAIL, institutions
and other commercial establishments. Your company has more than 70
Bureau of Energy Efficiency (BEE) certified Energy Auditors/Managers.
So far through energy audits, energy saving potential equivalent to
4750 MU with avoidable generation of about 900MW has been identified
besides reduction in C02 emission. Towards demand side management, your
company replaced 1337 old agricultural pumps with energy efficient
pumps in Mandya district, Karnataka resulted into energy saving more
than 35% with about 3MW load reduction.

Your company is also a BEE Grade-I Energy Service Company (ESCO) to
implement energy efficiency solutions. In-house designed Waste heat
recovery systems for steel re-rolling mills and implemented at various
industries.

Your Company has released a study report "Negawatt Makes-a-Watt" i.e,
Energy efficiency opportunities in India covering eighteen(18) energy
intensive sectors in the country. Savings more than 20% in electrical
energy, 12% in Coal and 7% in oil can be achieved per annum at an
investment of Rs.12 lakh crore over a period of 5 years.

''POWERTEL'' - TELECOM SERVICES ON TRANSMISSION INFRASTUCTURE

Your Company is leveraging its Country wide transmission infrastructure
with its diversified business portfolio of Telecom under the brand name
''POWERTEL''. During the FY 2014-15, total network coverage has been
increased by 12% to 33,241 kms from the earlier reach of 29,641 kms.
Number of Points of Presence (PoPs) locations have been increased to
352 from the earlier coverage of 317 PoPs and 44 new customers were
added, resulting in increase in total customer base to 187 numbers and
a growth of 25% over previous year.

Telecom Backbone Availability for the year 2014-15 was 99.97% better
than in the previous year. Total Revenue (including revenue from
internal sources) from Telecom Business for FY 2014-15 was Rs. 300.95
Crore as against Rs. 288.21 Crore in the previous year.

Your Company has signed an agreement with Bharat Sanchar Nigam Limited
(BSNL) to improve the telecommunication connectivity with the
North-Eastern States including Sikkim. It envisages the provisioning of
bandwidth on optical fibre media laid over existing high tension
electric transmission network of your Company. After completion of the
proposed connectivity, the reliability of the telecom services shall
improve substantially in North-Eastern region including Sikkim. Your
Company has successfully completed the prestigious NKN (National
Knowledge Network) project assigned by Govt. of India, which connects
all knowledge centres across the Country such as Indian Institutes of
Technology (IITs), Indian Institute of Sciences (IISCs) etc., on a high
speed connectivity.

National Optical Fibre Network (NOFN)

As a part of Government of India plan to connect 250,000 Gram
Panchayats (GP) in the Country by utilizing existing fibres of PSUs
(BSNL, Railtel and POWERGRID) and laying incremental fibre to connect
to Gram Panchayats wherever necessary, Your Company has been allotted
work for development & maintenance of NOFN network in States viz.
Telangana, Himachal Pradesh, Jharkhand & Odisha by Bharat Broadband
Network Ltd (BBNL). Survey work has been completed in all states.
Awards have been placed progressively for supply of duct & accessories
and trenching & laying work. 977 nos of Gram Panchayats have been
connected with fibre till 31st March 2015.

BUSINESS DEVELOPMENT & CONSULTANCY

Your Company, one among the largest power transmission utility in the
world, has developed the expertise in its core areas such as power
transmission, sub-transmission, load dispatch and communications (LD&C)
etc.

Leveraging its capacity and experience, Consulting services have been
provided to a number of customers in India and worldwide. During FY
2014-15, forty (40) Consultancy assignments were secured. During the
fiscal 2015, the Company achieved Consultancy Revenue ofRs. 381 Crore
from Consulting services.

In order to expand consultancy market even farther, exploratory forays
are being persistently charted out in Oil sector, Railways, Industrial
Corridors, etc. which are likely to bear fruit in near future.

Some of the engagements in green-shoot areas like Smart Grid /
Non-conventional Renewable Energy and Energy Efficiency initiated by
the Company also have potential opportunities to contribute towards
income from consulting services.

INTERNATIONAL

Your Company secured a total of 10 assignments with consulting fee of
about Rs. 3,700 Lakhs during FY 2014-15, in international arena. Your
Company has now international presence in a number of countries of
Asia, Africa & Eurasia regions. Countries in which consulting services
are being provided include in Afghanistan, Bangladesh, Bhutan, Congo,
Ethiopia, Nigeria, Nepal, Kazakhstan, Kenya, Kyrgyz Republic, Myanmar,
Senegal, Tajikistan, Tanzania, Uzbekistan etc.

During the FY 2014-15, your Company successfully completed the contract
worth USD 64.01 million awarded by Myanmar Electric Power Enterprise
(MEPE), within time schedule, for supply of Goods and related Services
for 230kV Transmission System associated with Thahtay Chaung Hydro
Power Project in Myanmar.

INTERNATIONAL COOPERATION

The proposed cross-country grid is being envisaged for harnessing SAARC
nations'' capacities and resources to address growing energy needs of
the region. Presently, India has interconnections with Nepal, Bhutan
and Bangladesh, which are being strengthened for mutual exchange of
power. With these interconnections, while the county imports around
1,500 Megawatt (MW) of power from Bhutan, it exports around 500 MW
power to Bangladesh and 150 MW power to Nepal.

Further, for evacuation of power from various upcoming hydroelectric
power projects(HEPs) in Bhutan, Punatsangchu-I HEP (Bhutan) -
Alipurduar (India) 400kV Double Circuit (D/c) line between countries
Bhutan & India, is under implementation and expected to be ready by
2017. Also, for transfer of bulk power, interconnection between India
and Nepal through 400 kV Dhalkebar (Nepal) - Muzaffarpur (India) D/c
transmission line is under implementation. Further, to augment the
power transfer capacity of India - Bangladesh asynchronous
interconnection through 400kV (charged at 132kV) Surajyamaninagar
(India) - Comilla (South) (Bangladesh) line, addition of another 500MW
power terminal module at Bheramara is being firmed up, which will
increase the power transfer capability between the two nations by
500MW. For interconnection between India and Sri Lanka through a
±400kV, 500/1000MW under-sea HVDC line, feasibility studies carried out
and reports under review. Discussion for interconnection between India
and Pakistan through Amritsar (India) - Lahore (Pakistan) line are
being held at Government level.

CONTRIBUTION IN DISTRIBUTION REFORMS

Under DDUGJY (Deendayal Upadhyaya Gram Jyoti Yojana) scheme (including
erstwhile RGGVY) for rural electricity infrastructure and household
electrification, your Company has been executing infrastructure work
for rural electrification in sixty-seven (67) districts of nine (9)
States in the Country of a base cost of about Rs. 7,409 Crore.

Almost all of the X / XI plans schemes have been completed. Work in 4
districts in Uttar Pradesh (UP) assigned to POWERGRID under XI Plan
Phase-II and XII Plan are under implementation.

During FY 2014-15, infrastructure was created for electrification in
581 nos. of partially electrified villages. Also, 2666 nos. of villages
were energised. Cumulatively, till March, 2015, infrastructure has been
created for electrification of 71,622 villages. Further, service
connections were provided to about 35.9 lakh BPL households.

For rural electrification under DDUGJY, your Company has been engaged
for execution of projects under the XII Plan in 15 districts of Odisha
having sanction cost of about Rs. 1767 Crore and earning potential
ofRs. 159 Crore.

XII PLAN PROGRAMME

The Capex plan of your Company has been increased to Rs. 1,10,000 Crore
from Rs. 1,00,000 Crore envisaged earlier for XII Plan mainly due to
additional transmission infrastructure of various inter-State
transmission systems including Green Energy Corridors projects.

Your Company has already made a capital expenditure of Rs. 65,651 Crore
in the first three years of the plan period. Based on the ratings given
by both domestic and international credit agencies, your Company do not
foresee any difficulty for resource mobilisation. The funding for
capital expenditure are planned to be met through loans from
multilateral institutions such as The World Bank, Asian Development
Bank, Supplier''s Credit, External Commercial Borrowings through bonds /
notes, besides loans from domestic market and through private placement
of bonds.

ERP IMPLEMENTATION & IT

Project "RUPANTAR", the Enterprise Resource Planning (ERP) initiative
of your Company has been implemented successfully in the year 2014-15.

Subsequent to completion of the User Acceptance Testing of the business
solutions, pilot Go-live of ERP took place in August 2014. After the
stabilization of the pilot region, roll out to balance regions was also
taken up and completed during October 2014 to February 2015. Presently,
majority of the key processes related to the business are running on
ERP. Also, a Disaster Recovery Site is being established at Bangalore.

Your Company continues to provide latest IT solutions for betterment of
its business process. Both Internet and Intranet have been provided in
offices and site locations all over the Country for seamless
connectivity and effective working environment. Recruitment process is
being conducted for self and for few other companies through online
application portal, which is designed, developed and maintained through
in-house expertise. Further, various applications like online status of
"Swachh Bharat Abhiyaan" (Clean India Mission) works, Inspection
Management System, Vigilance Inspection System and Attendance
Management System etc. are developed, run and maintained in-house for
assisting the business operations.

The Company has also taken up a major technology upgradation of IT
infrastructure such as implementation of cloud, security policy,
Information Security Management System (ISMS), etc. Further, ISO:27001
Certification for ISMS is also being implemented initially at Corporate
Centre.

Your Company has established video conferencing facilities at Corporate
Centre, all regional Headquarters, all major Project Headquarters as
well as at most of the substations. Video Conferencing is extensively
used to carry out meetings, discussions and trainings within and
outside POWERGRID network.

ENVIRONMENT AND SOCIAL MANAGEMENT

Your Company, since its inception is working to harmonise environment
conservation with all aspects of its projects. Your Company''s
activities are non-polluting in nature and their environmental impacts
are negligible. Your Company is committed to conservation of natural
resources, reducing impact on nature and increasing the service value
by use of efficient and safe technology practices.

Key initiatives taken by your Company towards sustainable development
are technological initiatives for conservation of precious Right of Way
(ROW), rain water harvesting system which is now an integral part of
every new substation design, installation of LED bulbs, solar lights,
fuel catalysts devices for DG sets etc. Your Company has substantially
reduced the land requirement by utilizing new technology like Gas
Insulated Substation (GIS) which requires less than one-third (1/3rd)
of the land compared to conventional Air insulated Substation (AIS). In
order to reduce Carbon footprint, waste paper are used to produce
recycled paper for printing of our office stationery like letter heads,
writing pads, visiting cards, envelopes etc. This has resulted in
reduction in use/procurement of fresh paper.

For the FY 2014-15 your Company have obtained final forest clearance
for 29 transmission lines involving 34 forest proposals involving
diversion of about 1760 hectares and in-principle forest clearance for
22 transmission lines involving 32 forest proposals for diversion of
about 1680 hectares. Some of the major lines for which such forest
clearances are obtained include 765 kV Angul-Jharsuguda, 400 kV D/C
Dehradun- Abdullapur, 132 kV S/C Tezu-Namsai, 765 kV D/C
Dharamjaygarh-Jabalpur etc.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is a commitment of your Company
to its stakeholders to conduct business in an economically, socially
and environmentally sustainable manner that is transparent and ethical.
It primarily focuses on inclusive social-economic growth for
development of marginalized and under-privileged sections of the
society residing around its areas of operation. With this approach,
your Company carries out various CSR activities with thrust on Rural
Development/Infrastructural Development, Livelihood Generation, Health,
Education, Tree plantation, Environmental, Relief/Restoration during
National Calamities etc.

During the FY 2014-15, your Company spent Rs. 47.42 Crore on various
CSR activities, which was 75% higher than amount spent of CSR
activities during FY 2013-14.

During the year under review, your Company has also participated in the
"Swachh Bharat Abhiyaan" by constructing about 10,000 toilets in about
4,500 Government schools in several states of India. It has also
undertaken Projects of imparting skill development trainings for
industry employment/ self - employment to about 7500 youths
departmentally and in association with National Skill Development
Corporation (NSDC), National Handicapped Finance and Development
Corporation (NHFDC), ITCOT etc. Your Company also distributed aids &
appliances to People with Disabilities in association with ALIMCO and
arranged "Health Check-up camps" at 30 locations.

Annual Report on corporate social responsibility (CSR) activities and
spend of CSR Amount is given at Annexure XII of this Report.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital

Employees are main resources for your Organization. During FY 2014-15,
your Company inducted about 321 personnel at various levels viz.
Executives, Supervisors & Workmen. Executives recruited through open
advertisement on all India basis from reputed engineering and
management institutes. Recruitment of non-executives was carried out
through employment exchanges and local advertisement at regional level.
As on March 31, 2015, the total number of employees of your Company
stood at 9,033.

Your Company''s Human Resource Development (HRD) interventions are
directed towards learning new competencies and to reinforce good work
practices & change workplace behaviour as per the organizational needs.
The Company has been able to link the Individual Development Plans
(IDP) of employees as per the business requirement, which helps the
organization to keep updating the competencies of employees to meet
current and future requirements. In order to align with growing
competitive business environment, your Company imparted training/ hands
on training on major equipment and their operation & maintenance, new
Land Acquisition Act, Certified Project Management Programmes, latest
survey techniques, networking skills and overhead power line design
program, etc.

The yearly Action Plan HRD has been based on ''Organisational Need
Analysis (ONA)'' and Training Needs Assessment (TNA)''. Competency
Analysis and Skill Gap Analysis have been carried out for various
functions in your Company by keeping in view the existing/emerging
business scenario. Skill development programmes in the areas of
transmission line construction, tower erection & stringing for
unemployed / under- employed youths have been conducted at various
locations in the Country and more than 600 such youths were trained
during FY 2014-15. For conducting such trainings, necessary
infrastructure has been created in POWERGRID sub-stations.
Cumulatively, about 1600 persons have been trained up to 31.03.2015
under this initiative for enhancing the availability of skilled
manpower for construction jobs in the field of transmission.

Your Company undertakes requisite changes in various policies from time
to time in line with the needs and welfare of employees. It has
empanelled various hospitals nearby to its establishments including
Corporate Centre for the healthcare of employees and their dependents.
The issues related to workmen are successfully addressed through the
National and Regional Bipartite Committee (PNBC/PRBC), a joint
consultative forum comprising management and workmen representatives.

An effective work culture has been established in the Company through
empowerment, transparency, decentralization and practice of
participative management. Industrial relations scenario in the Company
has been cordial and no man-days were lost in FY 2014-15. Healthy
community living is spread through periodically conducted cultural
programmes for celebrating various occasions like Diwali get-together,
Holi Milan, New Year, Raising Day, etc. in all establishments of the
Company. Quality food is served to the employees in the ISO 22000:2005
conferred Cafeteria, Office and Food Lounge of Multi-Purpose hall.

Your Company also conducts various sport competitions for boosting the
interest of employees in sports and games at intra and inter-regional
level for Kabaddi, Cricket, Volleyball, and Badminton etc. Your Company
also participates regularly in Inter-PSU Sports meet and its players
stood meritorious in Table Tennis, Cricket, Carom, Badminton & Kabaddi
tournaments and bagged a number of awards.

On the occasion of Silver Jubilee Celebrations a Mini-Marathon was
organised at Corporate Centre, Gurgaon in which employees including CMD
& Directors participated with their family members enthusiastically.

Prevention of Sexual Harassment at Workplace

As per the requirement of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition & Redressal) Act, 2013 (''Act'') and Rules made
thereunder, your Company has constituted Internal Complaints Committees
(ICC).

Citizen''s Charter

Citizen''s Charter has been formulated for the Company providing a
visible front of its vision, mission, objectives, commitments, terms of
service and its obligation to various stakeholders. In this,
information is available about Company''s schemes, policies, project
plans of the corporation and issues of general interest to
stakeholders.

Implementation of Official Language

Your Company, being sensitive towards our heritage, social and cultural
concerns, continues to prove its commitment for implementation of
Official Language Policy of Govt, of India.

Your Company has been encouraging and putting all efforts for promotion
of usage of ''Hindi'' in all aspects of management in all levels of the
Corporation. Further, the Company has organized various events such as
workshops to impart training in translation, enhancing working
knowledge through organizing computer trainings and Hindi classes, etc.
for increased use of Official language. Events like Akhil Bhartiya
Rajbhasha Sammelan, Kavi Sammelans (poetry sessions), Kavita
Pratiyogita, Hindi plays and various competitions for employees & their
families are organized. Publication of Hindi magazines and circulation
of Hindi newspaper to all departments is also being done to encourage
Hindi writing and reading. To provide further inspiration, employees
are nominated for external Hindi training programs which further
educate & encourage the employees to work in Hindi.

Various forums such as Parliamentary Committees on Official Language,
Advisory Committee on Official Language and Town Official Language
Implementation Committee (TOLIC) have applauded the efforts made by
your Company for implementation of Rajbhasha & receiving many
accolades.

Corporate Image through Communication Management

Communication Management is an important and powerful weapon for
building a strong corporate brand identity to strengthen and modify its
relationship with the internal and external stakeholders. Keeping in
mind the need for sustained, timely and bona fide communication
interventions, your Company has adopted various communication
strategies to highlight itself as a major power transmission
infrastructure giant contributing significantly towards development of
national economy.

Your Company has been issuing various press communiqué to highlight
growth, achievements, and developments with a view to maintain regular
interaction with the public. Your Company organizes ''Quarterly Press &
Analysts'' Meet'' to facilitate face to face interaction with the
journalists, analysts and stakeholders which is aimed at winning the
trust of the masses through imparting information in a transparent way.

To showcase its technologies and strengths, your Company participated
in the ''India International Trade Fair (IITF) 2014'' and Vibrant
Gujarat'' targeted towards the common masses and focused clients. Your
Company also participated in other business oriented exhibitions in
Mumbai, Delhi and the Country of Tanzania to reach out to the target
audience for pitching the business.

Communication is not effective unless and until it reaches out to the
employees who are the pillar of any organization. To achieve this, your
Company deploys various internal communication tools such as monthly
newsletters, house journals, wall magazines, lounge and regular media
updates. Beside this, Company regularly organizes open house for face
to face interaction between management and employees. Company has
prepared a corporate movie to showcase its journey on the occasion of
Silver Jubilee year. A motivated theme song was also prepared for the
employees. All these communication tools have helped individual in
gaining an understanding about the organization''s culture & function
and making them a brand ambassador of the Company.

RIGHT TO INFORMATION

In order to promote transparency and accountability, an appropriate
mechanism has been set up across your Company in line with ''Right to
Information Act, 2005''. Your Company has nominated CPIO/ Appellate
Authorities at its Corporate Office and Regional offices across the
Country to provide required information to the citizens under the
provisions of Act.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FUNCTION

Vigilance Department of your Company performs Preventive, Pro-active as
well as Punitive Vigilance. However, the emphasis has been shifted from
"Punitive Vigilance" to "Preventive and Pro-active Vigilance". Your
Company has taken a number of initiatives to inculcate good governance
within the organization. Some of these initiatives are given hereunder:

Process (Online) Inspection

Using this technique, inspections are planned in such a manner that
critical pre-award and post-award activities are inspected during
execution of works. Process (On-line) Inspection is done in order to
check whether there are any shortcomings or not, thereby providing an
opportunity for rectification of the defects before the work is
completed. Since the focus is more on prevention, critical observations
made during such inspections help the management in preventing similar
irregularities during the later stages of execution of the projects.

Web Based Vigilance Information Network System (VINS)

With a view to leverage Technology in our work, Vigilance Information
Network System (VINS) has been devised by your Company in collaboration
with the IT Department, which has significantly cut down time, efforts
and cost of working resulting into higher efficiency.

Workshop on Ethics & Values

Every year, two (2) workshops on Ethics & Values are conducted by the
Regional Vigilance Department as well as Corporate Centre. These are
aimed at encouraging value based ethical decision by the employees.
Further, Preventive Vigilance Workshops are also conducted by Vigilance
Department for non-vigilance executives. With a view to create
awareness among the employees, RTI workshops are organized by Corporate
as well as Regional Vigilance Department.

Vigilance Awareness Week 2014

Vigilance Awareness Week was observed in POWERGRID from October 27,
2014 to November 1, 2014. In keeping with the theme ''Combating
Corruption- Technology as an Enabler'', various competitions were
organized for the employees as well as for their family members, talk
on ethics & values and on anti-corruption topics were delivered by
eminent personalities. The week concluded with the release of in-house
journal of the Vigilance Department ''Candour'' by Shri Pratyush Sinha,
former Central Vigilance Commissioner.

ACCOLADES & AWARDS

The excellent performance of your Company has been recognised and
appreciated by the Govt. of India and other prestigious organisations &
institutions in form of various awards/ accolades in various categories
from time to time.

Your Company has been rated ''Excellent'' for its performance as per MoU
2013-14 signed with the Ministry of Power and based on its performance
poised to get ''Excellent rating'' for MoU 2014-15 as well.

Your Company has been conferred with the prestigious "ICSI National
Award for Excellence in Corporate Governance" for 2014 by Institute of
Company Secretaries of India (ICSI) in recognition of the highest
levels of transparency and governance practices adopted by the Company.

Your Company proved its mettle on global front by positioning itself in
the "Forbes List of Global 2000 Largest and Most Powerful Public
Companies", and also "fastest growing electric utility in the world" as
per M/s Platts (a division of McGraw-Hill Companies).

"The Economic Times" at its Power Focus 2nd Annual Summit awarded your
Company for its remarkable contribution in the Power Sector.

Your Company has been conferred with "CBIP Award" for the best
performing Transmission Utility and your CMD has been felicitated with
the "Power Persona of The Year Award" by CBIP in recognition of his
contribution for accelerated development of power sector.

Your CMD has also been bestowed the prestigious "IEF Meritorious Energy
Service Award"

Director (Finance) of your Company, Shri R. T. Agarwal, has been
felicitated with the "CA-CFO-Power Sector Award" by the Institute of
Chartered Accountants of India in recognition of exceptional
performance as CA-CFO in Power Sector for the Year 2014.

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the issues in the Directors'' Report, some issues have
been brought out in report on Management Discussion and Analysis placed
at Annexure-I.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 of the
Listing Agreement with the Stock Exchanges is given in Annexure-II.

As per requirements of disclosures under Section 134(3) (m) of
Companies Act,2013 read with Rule 8 of The Companies (Accounts) Rules,
2014 information relating to conversation of energy, technology
absorption and foreign exchange earnings and outgo, is given in
Annexure-III to this Report.

Auditors'' Report

The qualification in Statutory Auditors'' report and managements reply
thereto is given at Annexure - IV to this Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has received ''NIL'' comments on the standalone accounts for the
year ended March 31, 2015 by the Comptroller and Auditor General of
India under Section 143(5) of the Companies Act, 2013. C&AG comments on
the consolidated accounts and management''s reply thereto are attached
as Annexure-V to this Report.

Performance Audit

The Performance Audit has been conducted by C&AG to assess the
effectiveness of ''Planning & Implementation of transmission projects by
POWERGRID during XI Plan (2007-2015) and Grid Management by POSOCO.''
The Performance Audit report was placed before the Committee on Public
Undertakings in August, 2015. The points forwarded by the Committee in
the said report have been duly replied by the management.

Composition of the Board

Your Company''s composition of Board of Directors underwent some changes
during the year 2014-15. Shri Santosh Saraf and Smt. Rita Sinha,
non-official part time directors ceased to be Directors on the Board of
the Company w.e.f. December 27, 2014. The Board wishes to place on
record its deep appreciation and gratitude for the significant
contribution and support to the Company extended by them during their
tenure as Directors of the Company.

As on 31st March, 2015, the Board comprised Twelve Directors out of
which five were whole-time Directors including the Chairman & Managing
Director, two Government nominees and five Independent Directors.

In accordance with the provisions of Section 160 of the Companies Act,
2013 read with Article 31 (iii) of the Articles of Association of the
Company, Shri Ravi P. Singh, Director (Personnel) and Shri R.P. Sasmal,
Director (Operations) shall retire by rotation at the Annual General
Meeting of your Company and being eligible, offer themselves for
re-appointment.

Number of meetings of the Board

The details of number of Board / Committee meetings held during the
year are provided in the Report on Corporate Governance, which forms
part of this report.

Declaration by Independent Directors:

All the Independent Directors have met the requirements specified under
Section 149 (6) of the Companies Act, 2013 regarding holding the
position of ''Independent Director'' and necessary declaration from each
Independent Director under Section 149 (7) has been received.

Performance Evaluation of Directors:

The requirement of performance evaluation of directors under Section
178(2) of the Companies Act, 2013 has been done away with for
Government Companies vide Ministry of Corporate Affairs'' Notification
dt. 5th June, 2015. The Independent Directors in their separate meeting
has reviewed the work assigned to them under Schedule IV of the
Companies Act, 2013, including performance evaluation of Directors and
the Board.

Further, the appointment, tenure and remuneration of Directors is
decided by the President of India. Remuneration paid to Chairman &
Managing Director and Functional Directors are as per terms and
conditions determined by the Department of Public Enterprises, Govt. of
India. Independent Directors are paid only sitting fee per Board /
Committee meeting attended. POWERGRID enters into Memorandum of
Understanding (Moll) with Ministry of Power every year wherein Company
is evaluated on various financial and non-financial parameters.

Secretarial Audit

M/s Chandrasekaran & Associates, Practising Company Secretary has
conducted Secretarial Audit of the Company for the financial year ended
March 31, 2015 from. The Report forms part of this Annual Report at
Annexure-VI.

The Secretarial Auditor in his report has made the following
observations:

"During the period under review the Company has generally complied with
the provisions of the Act, Rules, Regulations, Guidelines, Standards,
etc. mentioned above subject to the following observations:

1. The Company has complied with the provisions of Section 149 of the
Companies Act 2013 and clause 49 of Listing Agreement except with
respect to the requirement of appointment of minimum number of
Independent Directors since 27.12.2014.

2. The Company has not filed certain e-forms relating to creation of
charges with the office of the Registrar of Companies where the
Permanent Account Number (PAN) of the lenders are not available, which
is mandatory."

Further, the explanation given by the Board on the observation given by
the Secretarial Auditor are as under;

1. POWERGRID, being a Govt. Company within the meaning of Section 2
(45) of the Companies Act, 2013, the power to appoint Directors vests
with the President of India. The matter has already been taken up with
administrative ministry for filling two existing vacancies of
Independent Directors on the Board of POWERGRID.

2. POWERGRID could not file certain e-forms relating to charges in
MCA21, wherein the Lenders are Multilateral Agencies-World Bank, ADB
and IFC for non-availability of PAN of these Agencies. PAN is a
mandatory fill under e-filing in MCA-21.

Extract of Annual Return

In accordance with Section 134 (3) (a) of the Companies Act, 2013, the
extract of the annual return in the prescribed format in MGT-9 is given
as Annexure VII of this Report.

Committees of the Board

The Company has Audit Committee, CSR Committee and other Committees in
place. The composition and scope of the Committees are provided in the
Report on Corporate Governance.

A report on the Corporate Governance (Annexure-VIII), forming part of
this report, together with the Certificate thereon is given in
Annexure-IX to this Report.

Risk Management Policy

A Statement indicating development and implementation of a risk
management policy of the Company including major elements of risk are
given in the Management Discussion and Analysis Report at Annexure-I of
this Report.

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller
& Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee &
Co., and M/s Sagar & Associates were appointed as Joint Statutory
Auditors for the financial year 2014-15.

The Cost Audit Reports for the FY 2014-15 will be filed with the Cost
Audit Branch, Ministry of Company Affairs before due date i.e.
September 27, 2015.

ACKNOWLEDGEMENTS

The Board of Directors, with deep sense of appreciation, acknowledges
the guidance and co-operation received from Govt. of India,
particularly Ministry of Power, Ministry of Finance, Ministry of Home
Affairs, Ministry of External Affairs, Ministry of Statistics and
Programme Implementation, Ministry of Environment & Forests, Central
Electricity Regulatory Commission, Appellate Tribunal for Electricity,
Central Electricity Authority, Department of Public Enterprises,
Regional Power Committees, and other concerned Govt.
departments/agencies at the Central and State level as well as from
Securities and Exchange Board of India, National Stock Exchange of
India Ltd., and Bombay Stock Exchange Ltd., Mumbai without whose active
support, the achievements of the Corporation during the year under
review would not have been possible.

Board''s special appreciation and thanks are to our valued customers,
State Governments and State power utilities and other clients, who have
awarded various works on consulting services basis and reposed faith in
Company''s capability to handle them. The Board also appreciates all its
the contribution of Contractors, Vendors and Consultants for successful
implementation of cvarious projects by the Company.

The Directors take this opportunity to thank the Principal Director of
Commercial Audit and Ex-Officio Member Audit Board-Ill for the
cooperation during the year. The Directors also acknowledge the
valuable suggestions and guidance received from the statutory auditors
during the audit of accounts of the Company for the year under review.
The Board also records its appreciation to national/ international
financial institutions/ multilateral Financial Institutions (The World
Bank & Asian Development Bank)/ Banks/ national (ICRA & CRISIL) &
international (Standard & Poor and Fitch) credit rating agencies for
their assistance, continued trust and confidence reposed by them on
POWERGRID.

On behalf of Board of Directors, I would like to place on record our
deep appreciation of the dedicated efforts and valuable services
rendered by the members of the POWERGRID family, in the Company''s
achievements during the year 2014-15. I would also like to thank the
Executive team for their strong leadership, the employee unions, for
their support and all our employees for their commitment to achieve the
aim to be the world''s premier transmission utility.

For and on behalf of the Board of Directors

(R. N. Nayak)

Chairman & Managing Director

Place: New Delhi

Date: 10.08.2015

Mar 31, 2014

Dear Shareholders,

Ladies & Gentlemen,

It gives me immense pleasure to present on behalf of the Board of
directors, the 25th Annual Report on the performance of your Company
during the financial year ending March 31, 2014 together with Audited
Statement of Accounts, Auditors'' Report and Review of the Accounts by
the Comptroller and Auditor General of India for the review period.

It is a matter of pride that this "Navratna" Company, having been
formed in 1989, is presently in its "Silver Jubilee" year. It is
another happy coincidence that with the commissioning of
Raichur-Solapur 765kV Single Circuit line, the work of synchronously
connecting the nation, with One Nation, One Grid, One Frequency was
also successfully completed in this year. This has led to the emergence
of one of the largest electrical grids operating at a single frequency
in the world. during these years of electrical unification, the Company
displayed its proficiency in all its areas of operation and this has
led to a continuous, holistic and inclusive growth of inter-State
transmission System. The addition in transmission system, together with
efficient operation of such a large network, has indeed contributed
phenomenally in development of infrastructure in the country.

Your Company''s sustained performance, reflected through continuous
asset creation, increasing revenues, and resultant profits, has also
led to creation of value for its shareholders and speaks volumes of its
growth journey and operational excellence. Your Company''s strategic
importance in development of the country''s power sector has further
enhanced its reputation not only within the country but also globally.
The confidence of the international investor community, enjoyed by your
Company, was evident through their overwhelming response to its second
Follow-on Public offer which witnessed a huge interest from the
international investors.

Your Company once again demonstrated consistency in exceeding most of
the performance targets agreed under the Memorandum of Understanding
signed with Ministry of Power (MoP), Government of India for FY 2013-14
and is poised to be rated ''Excellent'' in MoU parameters thus
consistently maintaining the record of Excellence year after year since
its first MoU signed in 1993-94.

Based on overall performance, your Company stood at top amongst the
assessed Companies in the Power Generation and Transmission Syndicate
for the FY 2012-13.

Major achievements by your Company during FY 2013-14 on various fronts
are mentioned below:

- Maintained transmission system availability at 99.92% with number of
trippings per line limited at 0.56.

- An important landmark, i.e. synchronous interconnection of all-India
National Grid, has been achieved through successful commissioning of
Raichur (Karnataka) - Solapur (Maharashtra) 765kV Single Circuit line
on december 31, 2013.

- Total inter-regional power transfer capacity of 6,300Mw was added
during the year thereby enhancing the cumulative inter-regional power
transfer capacity of National Grid to about 37,950 Mw at the end of
March, 2014.

- International interconnection has been established between India and
Bangladesh with the commissioning of Bheramara (Bangladesh)

- Baharampur (India) 400kV d/c line, along with 500Mw High Voltage
direct Current (HVdC) back-to-back terminals at Bheramara. The
interconnection was inaugurated jointly by Hon''ble Prime Ministers of
India and Bangladesh.

FINANCIAL PERFORMANCE

Your Company recorded an impressive financial performance during FY
2013-14 as detailed below, achieving a turnover of Rs. 15,721 Crore and
Net Profit of Rs. 4,497 Crore as compared to Rs. 13,329 Crore and Rs. 4,235
Crore during FY 2012-13, registering an increase of 17.9% and 6.2%,
respectively.

Your Company continues to show improved performance in all its business
areas including Telecom and Consultancy, enhancing the value for the
shareholders.

(Fig. in Crore except EPS & Book value)

Description 2013-14 2012-13 Y-o-Y Growth

Revenue

Transmission Charges 14,250 12,163 17.2%

Consultancy - Sale
of Service 333 229 45.4%

Consultancy Â Sale
of Product 294 86 241.9%

Telecom 276 231 19.5%

other operating Income 77 49 57.1%

other Income 491 571 -14%

Total Income 15,721 13,329 17.9%

Profit After Tax (PAT) 4,497 4,235 6.2%

Earnings per Share (Rs.) 9.36 9.15 2.3%

Book Value per Share(Rs.)65.78 56.62 16.2%

Gross Fixed Assets 96,504 80,600 19.7%

Long term borrowing* 80,470 66,188 21.6%

Net Worth 34,413 26,213 31.3%

Debt Equity Ratio 70:30 72:28

Investment 23,158 20,037 15.58%

Capital Investment and Fund Mobilization

During the year under review, your Company made an investment of Rs.
23,158 Crore (15.58% higher than previous year) for implementation of
its projects in line with its capex-programme under XII Plan. For this,
funds of about Rs.15,528 Crore were mobilised through private placement
of bonds, and proceeds of ongoing Supplier''s credit, SBI Line of
credit, and loans from multilateral funding agencies like The world
Bank, Asian development Bank. In addition, the accrued internal
resources and FPo proceeds amounting to about Rs. 7,630 Crore were
utilized for funding equity component of the investment.

Your Company''s second Follow-on Public offer of equity shares
comprising fresh issue of 13% of existing paid-up equity capital and
disinvestment of 4% by Govt. of India was successfully concluded. The
issue price was finalized at the upper band of Rs.90 and was
oversubscribed 6.74 times overall. while your Company received Rs. 5,321
crore from the proceeds, the Govt. of India received Rs. 1,637 Crore.

At the beginning of the year 2013-14, your Company''s International
Credit Rating by both Standard & Poor''s (S&P) and Fitch Ratings Ltd.
(Fitch) was BBB- (outlook Negative) which was consistent with India''s
sovereign rating. In June, 2013, Fitch Ratings revised the outlook on
sovereign rating to ''Stable'' from ''Negative'' and accordingly your
Company''s rating by Fitch was raised to BBB- (outlook Stable). The
Company continues to have its rating as ''AAA/ stable'' (triple A with
stable outlook) by CRISIL, ICRA and CARE ratings domestically.

Dividend Payout

Your Company has been regularly paying dividend @30% of PAT as
prescribed under dPE guidelines. For FY 2013-14, your Company has
proposed a final dividend of Rs.1.31 per share in addition to Rs. 1.27 per
share of interim dividend paid in March, 2014. The final dividend shall
be paid after your approval at the Annual General Meeting. Thus, the
total dividend payout for the year amounts to Rs. 1,350 Crore (including
an interim dividend of Rs. 665 Crore) as against Rs. 1,273 Crore paid
during the previous year. The total dividend payout including dividend
tax accounts for 35% of Profit after Tax of the Company.

i. in the preparation of the Annual Accounts, the applicable
accounting standards have been followed;

ii. the directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Company at the end of the financial year and of the profit of
the Company for that period;

iii. the directors have taken proper and sufficient care in accordance
with the provisions of the Act for safeguarding the assets of the
Company and for preventing and detecting fraud and other
irregularities;

iv. the directors have prepared the annual accounts on a going concern
basis.

COMMERCIAL PERFORMANCE

As per Central Electricity Regulatory Commission (Sharing of
inter-State Transmission Charges and Losses) Regulations, 2010, your
Company, as the Central Transmission Utility (CTU) of the country, has
been assigned the responsibility for carrying out activities such as
raising of transmission charge bills on behalf of all the Inter-State
Transmission System (ISTS) Licensees, collecting the amount and
disbursing the same to them. In this regard, bills of transmission
charges are prepared, raised and uploaded on the website portal for
designated ISTS Customers (dICs), including the payment details by the
customers.

It is a matter of pride that the Company achieved about 99% realisation
of transmission tariff during FY 2013-14.

OPERATIONAL EXCELLENCE

As on April 01, 2014, the transmission assets owned and operated by
your Company stand at about 106,804 Ckm of Extra High Voltage (EHV)
transmission lines and 184 Nos. EHVAC & High Voltage Direct Current
(HVDC) sub-stations with about 205,923 MVA transforma tion capacity.
Your Company continues to wheel about 50% of the total power generated
in the country.

Maintaining such a large and highly complex transmission network has
been an extremely difficult and challenging task. This has been
achieved through deployment of state-of-the-art operation and
maintenance techniques, which are at par with international standards.
Maintenance activities are planned well in advance and an "Annual
Maintenance Plan" is chalked out for every asset such that ''Preventive
maintenance'' takes precedence over ''breakdown maintenance''.

Your Company introduced aerial patrolling of transmission lines using
helicopter for the first time in India. Transmission line defects are
identified by deploying helicopter equipped with Gimbal mounted LIdAR
(Light Ranging and detection), Thermo-vision Camera, High resolution
digital Video cameras. while Hotline maintenance of 400kV transmission
line is already in vogue, your Company is also planning to introduce
Hotline maintenance of transmission lines of 765 kV voltage level using
Helicopter. To intercept major failures and prevent them, your Company
has adopted state-of-the-art condition monitoring techniques, such as
''Frequency Response Analysis'' for Transformers and Reactors, ''dynamic
Contact Resistance Measurement'' for Circuit Breakers, ''Third Harmonic
Resistive Current measurement'' for Surge Arrestors, ''Thermo-vision
scanning'' etc. The Company has also started online monitoring of 765kV
equipment (transformers and reactors) for measurement of critical
parameters.

Your Company deploys State-of-the-Art ''Emergency Restoration System''
for immediate restoration of collapsed transmission lines due to
natural calamities before permanent restoration work is taken up. Your
Company has also taken initiative for development of Emergency
Restoration System (ERS) for sub-stations of 400kV level using mobile
substations mounted on trailer to restore power during emergency and
extremely critical situation, wherein whole/ major part of substation
is affected.

With a view to optimize its operation and maintenance manpower and
efficiently deploying them, your Company is establishing "National
Transmission Asset Management Centre (NTAMC)" at Manesar, Haryana for
centralised remote monitoring, operation & control of sub- stations.

At the end of 2013-14, fifty-one (51) substations are being operated
through remote operation and twelve (12) substations are unmanned.
Maintenance Service Hub facility has also been established where
specialised group of experts are available for immediate deployment in
the event of requirement.

The result of consistent efforts and round the clock monitoring is
demonstrated through your Company''s high operational performance during
the year in terms of transmission system availability (99.92%) and the
number of tripping per line (0.56).

International Benchmarking of O&M practices

with an aim of continual improvement, o&M practices of your Company are
being benchmarked internationally through "International Transmission
operation and Maintenance Study" (IToMS) carried out by UMS, USA. In
IToMS studies/ benchmarking, twenty-eight (28) power transmission
utilities across the globe participated and their performances are
evaluated and benchmarked. As per the studies, your Company''s overall
performance stood in the best quadrant (i.e. low cost and high
performance). In addition, performance benchmarking of all nine (9)
Regions amongst each other and the region(s) with external member
Utilities of IToMS, was also carried out to identify areas of
improvement.

PROJECT IMPLEMENTATION

Your Company continues to put in its best efforts to complete its
transmission projects within scheduled timelines, thereby extracting
the maximum commercial benefit. The Company achieves this through its
Integrated Project Management and Control System (IPMCS), timely review
meetings, intensive monitoring by top management through video
conferencing/ regular site visits and undertaking various pre-emptive
initiatives.

As a result of above steps and with the dedicated efforts of the
employees, assets worth about Rs. 15,904 Crore were capitalized by your
Company during the year 2013-14, adding about 6,604 ckm transmission
lines, 17 sub-stations and about 41,160 MVA transformation capacity in
the transmission system. Some of the major transmission assets
commissioned during the year include 765kV transmission lines such as
Sasaram-Fatehpur (S/c), Raichur-Solapur (S/c), Ranchi-wR Pooling
Station (S/c), Fatehpur Â Agra (S/c), Jabalpur Pooling Station Â Bina
(d/c), Raigarh (Kotra) Â Raipur (d/c). The projects were completed in
spite of severe constraints faced during its implementation including
challenging terrains, severe Right-of-way (Row) problems. The
implementation of High Capacity Power Transmission Corridors is
underway and some elements under the same have already been
commissioned.

During the year, investment approval was accorded for 19 new projects
with an estimated cost of about Rs. 8,548 Crore, which involves about
5,530 ckt km of transmission lines, 4 new sub-stations and
transformation capacity of about 12,730 MVA were taken up for
implementation.

DEVELOPMENT OF NATIONAL GRID

In its ''Silver Jubilee'' year, your Company achieved one of the major
objective of its formation. Nationwide synchronous power grid is
established upon successful commissioning of 765kV S/c Raichur Â
Sholapur line on 31st december, 2013. with this, ''One Nation - One Grid
Â One Frequency'' has become a reality. Your Company has also
commissioned 765kV S/c Sasaram Â Fatephur and 765 kV S/c Ranchi-wR
Pooling Station inter-regional lines, having 2100 Mw power transfer
capacity each. Thus, in this F Y, your Company has added a total
inter-regional power transfer capacity of 6,300 Mw, thereby adding
total capacity of 8,300 Mw during the first two years of the XII plan
period. At the end of 2013-14, the inter-regional power transfer
capacity of 37,950 Mw has been established.

By the end of XII Five Year Plan, inter-regional power transfer
capacity is envisaged to be 72,250 Mw.

PERFORMANCE AGAINST COMPETITION

Your Company continued to display impressive performance under Tariff
Based Competitive Bidding (TBCB) by excelling over its competitors.
during the year 2013-14, your Company acquired two Special Purpose
Vehicles (SPVs), namely ''Vizag Transmission Limited'' and ''Unchahar
Transmission Limited'' for the projects Transmission System for System
Strengthening in Southern Region for Import of Power from Eastern
Region and Transmission System for ATS of unchahar TPS, respectively.
As on March 31, 2014, the Company has secured 5 projects under TBCB,
and has won about 40% of the projects floated under TBCB since January,
2011.

GRID MANAGEMENT AND OPEN ACCESS

Power System operation Corporation Limited (POSOCO), a wholly owned
subsidiary of your Company, continues to look after the grid management
of the country. POSOCO with its state-of-the-art Unified Load despatch
& Communication (ULdC) facilities in place, carries out the function
efficiently and transparently. Further, National and Regional Load
despatch Centres (NLdC & RLdCs) are upgraded and modernised
continuously to establish an effective grid management infrastructure
in the country.

During 2013-14, to meet the demands in the country, about 78.38 Billion
units (Bus) of inter-regional energy transfer was facilitated, across
the nation using pan-India inter-regional transmission links and RLdCs.

Under Short Term open Access (STOA), your Company has approved about
33,917 transactions, 10,290 nos. bilateral transactions and 23,627 nos.
collective transactions, involving 87 BUs of energy transfer in FY
2013-14 as against 32,139 transactions and about 73 BUs of energy
transferred during FY 2012-13.

Your Company, as Central Transmission Utility (CTU), is the nodal
agency for processing & grant of Connectivity, Medium Term open Access
(MToA) and Long Term Access (LTA) of various applicants. Till March 31,
2014, the Company granted LTA to 148 nos. of applications for 80,000 Mw
capacity, out of 223 applications received in all. Further,
connectivity was granted for 79 nos. of eligible applications for
70,000 Mw capacity out of 190 applications received for about 195,000
Mw capacity in all. Till 31st March 2014, 127 applications were
received for MToA and MToA was granted to 48 nos. of applications in
all for about 4,500 Mw capacity.

QUALITY MANAGEMENT

Your Company has put in lot of effort in identifying and implementing
various quality improvement measures during the year 2013-14. By way of
carrying out continuous process/ surveillance audits, your Company
created win-win partnership with suppliers to get superior quality
product including reduction in cost.

with the increased area of work & value of supply of equipment/
materials, capacity building remains one of the major challenges for
the Company. Inclusion of new vendors upon assessment and developing
new sub-vendors especially for 765 kV transformers, reactors,
transmission towers were undertaken on priority to meet project
requirements.

Process audits are continued to be carried out in the manufacturing
units of various vendors, sub-vendors & even further below in supply
chain, which are spread all over the country, to achieve the target of
zero product inspection. Quality audits at sites were also undertaken
during the year for instant feedback and to take appropriate corrective
action.

Your Company undertook various activities to ensure that the
equipment/material conform to the technical specifications and are
supplied in time to meet the completion targets of the projects, such
as defining proper processes, quick approval of Quality plans,
intelligent inspection of materials (in process & before acceptance).
during the year, continuous follow up with manufacturers for timely
manufacturing, testing of various critical items and issue of requisite
clearances were expedited.

Your Company continues to develop and maintain systems & procedures
aligned with Integrated Management System comprising ISo 9001: 2008 for
Quality Management System, ISo 14001: 2004 for Environmental Management
System and oHSAS 18001: 2007 for occupational Health and Safety
Management System. The certification has been maintained after rigorous
audits by BSI Management Systems. Your Company also completed
implementation of PAS 99 in ER-I and SR-II during FY 2013-14.

TECHNOLOGY DEVELOPMENT

Your Company has been at the forefront in adoption of state-of-the art
technologies for improving the efficiency in power transmission and for
overcoming the challenges associated with establishment of high
capacity power transmission corridors and the National Grid.

One of the key focus areas is the adoption of transmission of power at
higher voltage level. Implementation of ±800kV HVdC & development of
1200kV Ultra-High-Voltage AC (UHVAC) system are important milestones in
this direction.

800kV Multi-Terminal HVDC System

HVDC system facilitates bulk power transmission over long distances
with power controllability, reduced Row and transmission losses.
Implementation of ±800 kV, 6,000 Mw multi-terminal HVdC system of
around 2,000 kms. from North Eastern Region (NER) (Biswanath Chariali
in Assam and Alipurduar of west Bengal) to Northern Region (NR) (Agra
in Uttar Pradesh) is progressing well. during the year, 7 Converter
transformers were transported from Haldia port in west Bengal to
Biswanath Ghat in Assam over Brahmaputra River on Barges and delivered
at site. Upon completion, it shall be one of the largest multi-terminal
HVdC systems in the world at this voltage level.

1200kV UHVAC Transmission System

The 1200kV UHVAC technology, the highest voltage level in the world, is
being developed indigenously by your Company in collaboration with 35
Indian manufacturers under Public Private Partnership (PPP) and 1200kV
UHVAC National Test Station at Bina, Madhya Pradesh has been
established for the same. The 1200kV Single Circuit (S/c) and double
Circuit (d/c) test lines were successfully test charged along with one
1200kV bay and field tests are undergoing. Installation and charging of
2nd 1200kV single phase Circuit Breaker in the first bay of 1200kV
National Test Station, Bina was completed in december, 2013. Further,
erection of 2 units of transformer for single phase units of the
transformer bank in the second bay of the 1200kV test was also
completed.

Besides above, during the year, your Company also conducted feasibility
study on ''Superconducting Fault Current Limiter (SFCL)'' and formulated
a pilot project on Energy Storage in terms of technology, capacity,
etc..

Envisioning setting up of a world class laboratory for carrying out
research and development in power transmission area, your Company is
establishing POWERGRID Advanced Research and Technology Centre (PART)
at Manesar, Gurgaon, with state-of-the-art laboratories for power
system analysis, advanced equipment diagnostics, smart grid in
transmission and distribution, energy efficiency, power system control
and automation, material science and engineering design. Further, your
Company is also establishing a transmission line research lab to carry
out validation of transmission line design and subsequent optimization.

Your Company, in the quest to achieve fully digitized substations, is
in the process of introducing Process Bus technology for substations.
Your Company is also in the process of mapping pollution intensity of
various regions of the Country on a geographical map. This activity
shall enable efficient and effective transmission line designs,
particularly in high pollution and fog affected areas.

SMART GRID TECHNOLOGY

Your Company continues to take pioneering steps in bringing Smart Grid
technology in entire value chain of electricity in the country. In
order to promote smart grid technologies, your Company has developed
Smart Grid pilot project in the country through open collaboration, at
Puducherry. Almost all the attributes of Smart Grid viz Advance
Metering Infrastructure (AMI), outage Management System (oMS), demand
Response, Power Quality Management (PQM), Renewable Integration through
net-metering, Smart Home Energy Management System, Electric Vehicles,
Street Light Automation System etc. have been successfully integrated
at Smart Grid control centre at Puducherry through latest communication
technologies to showcase technology efficacy in a holistic manner.
Further, your Company has also prepared project reports for smart grid
solutions for Indiranagar (Bangalore), Paradeep Port Trust and Goa.

Recognizing experience and expertise in the field of smart grid
development, eight (8) utilities have appointed your Company as
Advisor-cum- Consultant for implementation of smart grid project at an
estimated cost of about Rs. 200 Crore during FY 2013-14.

Your Company has undertaken full scale implementation of real time
smart transmission projects applying State-of-the-Art wide area
measurement system (wAMS) using advance synchrophasor technology in the
grid. This Unified Real Time dynamic State Measurement (URTdSM) project
involves placement of Phasor Measurement Units (PMUs) at all 400 kV and
above substations, generation switchyards of 220 kV and above, HVdC
terminals and Phasor data Concentrator (PdC) at SLdC, RLdC & NLdC
control centres along with backbone communication infrastructure, which
has enhanced the efficiency of the overall grid management.

With the growing need of energy storage to facilitate integration of
renewables, your Company is implementing Battery energy storage pilot
project at Puducherry to evaluate different technologies for proof of
concept, application(s), policy advocacy etc. in Indian context. Your
Company has also taken lead initiative to establish base line data
repository on power quality parameters through field measurement at
various voltage level on pan India basis. It also involves
identification of mitigating measures/ devices like active harmonic
filter, automatic power factor controller etc.

Your Company has developed comprehensive master plan for grid
integration of envisaged renewable generation capacity addition during
the XII Five Year Plan through Green Energy Corridors across India. The
plan covers intra-state & inter-state transmission systems and
mitigating measures for grid interconnection of variable & intermittent
renewable energy. It also includes other control infrastructure like
forecasting tool for renewable generation, establishment of renewable
energy management centers, provisions for flexible generation, energy
storage, smart grid applications like demand side management & demand
response etc. Under this, your Company has been assigned the
implementation of inter- State Transmission System portion of the
scheme, setting up of Renewable Energy Management Centres and control
infrastructure to be included in the Kfw/GIZ, Germany proposal by
Ministry of Power, GoI. Your Company has been taking various actions
under this and implementation is expected to commence shortly.

The country has huge renewable energy potential through solar and wind,
of the order of about 300Gw, at desert/ cold desert waste land in
Kutch, Thar, Lahaul & Spiti and Ladakh. To harness the same, your
Company has also evolved an integrated development plan for
establishment and grid integration of 300Gw capacity addition by 2050
at an estimated cost of Rs. 43.75 lakh Crore, through hybrid transmission
corridors utilizing High Voltage direct Current (HVdC) (including VSC
based) as well as 1200kV UHV AC/ High temperature superconductor
technologies, etc.. A report on the plan, dESERT PowER INdIA Â 2050,
has been submitted to Ministry of Non-Renewable Energy (MNRE), Ministry
of Power (MoP), Ministry of Finance, Planning Commission, Central
Electricity Authority (CEA) and Central Electricity Regulatory
Commission (CERC).

Your Company has developed plan for installation of rooftop solar Photo
Voltaic (SPV) for residential consumers, commercial building, metro
stations & tracks and solar street lights for delhi towards
sustainability. It covers generation of about 2300 Mwp. A comprehensive
report, GREEN dELHI, was prepared and submitted by your Company to
Govt. of delhi, MNRE, MoP, Planning Commission, CEA and CERC.

ENERGY EFFICIENCY

India is one of the world''s emerging economic giants, with
ever-increasing energy demand. It is facing formidable challenges in
meeting its energy needs and sustainable development. Energy
conservation through energy efficiency measures shall play an important
part to address these challenges to a large extent. Considering
potential in this field, your Company has initiated activities in
carrying out energy audits of various establishments such as steel
industries, cable industries, structural industries, Port Trusts,
Airports, Institutions, etc and providing recommendations/ smart
solutions for energy efficiency improvement.

In a short time span, your Company has set a benchmark for itself as an
Energy Efficiency solution provider. The Company is known as a major
Energy Auditing firm in the country with more than fifty (50) Bureau of
Energy Efficiency (BEE) Certified Energy Auditors/ Managers. Your
Company has also obtained certification under BEE Grade-I Energy
Service Company (ESCo) for undertaking implementation of energy
efficiency projects on shared saving basis.

Your Company has indigenously designed and developed waste heat
recovery system executed projects and the same are operating
successfully, enabling huge fuel/ energy savings.

Towards energy conservation, your Company has also undertaken project
on demand Side Management in Karnataka for replacement of old
agricultural pumps with energy efficient pumps.

Another milestone was achieved during the year when the Corporate
office at Gurgaon and two Regional offices at Jammu & Hyderabad were
awarded ISo 50001 certification for its efficient and effective Energy
Management System.

''POWERTEL'' - TELECOM SERVICES ON TRANSMISSION INFRASTuCTuRE

Your Company diversified into Telecom business under the brand name
''POWERTEL'' to expand its revenue stream by installing overhead optic
fibre network using oPGw (optical Ground wire), leveraging its existing
countrywide transmission infrastructure. Your Company has an all India
Broad Band Telecom Network of about 29,640 km, providing connectivity
to all metros, major cities, towns, State capitals including remote
areas of North-Eastern Region, Jammu & Kashmir etc. and covering about
317 Points of Presence (PoPs) across the country from where services
are being rendered. Your Company possesses, Infrastructure Provider
Category-I (IP-I), Internet Service Provider ''A'' (ISP ''A'') and National
Long distance (NLd) Service License to provide a variety of Telecom
services. during the year 2013-14, the availability of Telecom
Backbone system was maintained at 99.94%. Your Company added 32 new
customers, increasing its customer base to 150. The income from Telecom
increased to about Rs. 276 Crore in FY 2013-14 from Rs. 231 Crore in FY
2012-13.

National Knowledge Network (NKN)

National Knowledge Network (NKN) is a multi-gigabit network, devised by
the Govt. of India with the purpose to provide a unified high speed
network backbone for educational institutions in India such as Indian
Institutes of Technology (IITs), Indian Institute of Science (IISc)
etc. on high speed connectivity. Your Company was one of the
implementing partners of this prestigious project and the scheme has
been operational. An amount of about Rs. 700 Crore has been received
against advance from National Informatics Centre (NIC) against NKN
order till March 31, 2014.

National Optical Fiber Network (NOFN)

The Government of India envisaged the setting up of National optical
Fiber Network (NoFN) for providing connectivity to all the 250,000 Gram
Panchayats (GPs) in the country. Your Company is a member of Advisory
Body and Core Committee of the ambitious NoFN project, which utilizes
existing optical fiber facilities of Bharat Sanchar Nigam Limited
(BSNL), POWERGRID and RailTel Corporation of India Limited to connect
the Gram Panchayats.

Under this, your Company has been allotted work for development &
maintenance of NoFN network in four States viz. Andhra Pradesh,
Himachal Pradesh, Jharkhand & odisha by Bharat Broadband Network Ltd
(BBNL), covering about 36,000 GPs. The work is to be carried out in
about 89 districts covering 1,769 blocks across these four States. The
estimated cost of the project for these states would be about Rs. 2,700
Crore. Under Phase-1 of this, your Company received Sanction Letter
from BBNL in october 2013 and has submitted to them Phase-1 plan
consisting of 37 districts, 670 Blocks and 14,000 Gram Panchayats.

BUSINESS DEVELOPMENT - CONSULTANCY

Domestic

During the year under review, the Company secured thirty seven (37) new
consultancy assignments. These include the project of national
importance for construction of 220kV Transmission System from Alusteng
(Srinagar) to Leh and 66kV interconnection system for drass, Kargil,
Khalsti & Leh substations in J&K entrusted by the Govt of India. Your
Company also signed agreements with six States of North Eastern region
(NER) (Assam, Meghalaya, Mizoram, Manipur, Nagaland and Tripura) to act
as ''Project design cum Implementation Supervision Consultant'' for
implementation of ''NER Power System Improvement Project'' with The world
Bank assistance.

Your Company continues to assist the State Utilities in development of
their Transmission & distribution (T&d) infrastructure. one such major
assignment includes construction of 765 kV Transmission System
associated with Lalitpur Thermal Power Plant (2000Mw) on behalf of the
transmission utility of Uttar Pradesh (UPPTCL). In addition, towards
Capacity Building assignments during the FY 2013-14, Training was
imparted to the employees of transmission utilities in Maharashtra
(MSETCL), Madhya Pradesh (MPPTCL), Bhakra Beas Management Board (BBMB)
and damodar Valley Corporation (dVC).

In order to broaden the consultancy avenues, exploratory initiatives
have been undertaken into oil sector & Railways, which are expected to
fructify into business assignments in near future.

International

In the international arena, during the year, your Company secured seven
(7) new assignments having total project cost of about Rs. 140 Crore. The
Company made inroads in four new countries and provided Consulting
Services in 15 countries, viz. Nepal, Bhutan, Bangladesh, Afghanistan,
Sri Lanka, Myanmar, UAE, Nigeria, Ethiopia, Kenya, Tajikistan, Congo,
Senegal, Kyrgyz Republic, and Pakistan.

During the year under review, among other notable achievements, was the
commencement of Management Consultant Project in Ethiopia for a period
of 2 years for Establishment & Management of new Ethiopian Electric
Power Company, leading to successful formation of a new Utility viz.
Ethiopian Electric Utility (EEU) at Ethiopia with its first CEo from
your Company. This year also marked completion of prestigious
inter-country 400kV asynchronous interconnection link between India and
Bangladesh in September, 2013 wherein your Company provided Consulting
Services from pre-award to final commissioning stage to Power Grid of
Bangladesh for their portion of linked Transmission System in
Bangladesh. Your Company has successfully fulfilled its consulting
service obligations for export of goods amounting to about US$ 64
million for 230kV transmission lines and substations associated with
the Thahtay Chaung Hydro Power Project in Myanmar. Your Company has
been appointed as Consultant through International Competitive Bidding
for 1000Mw HVdC Interconnection between Tajikistan, Kyrgyz Republic,
Afghanistan and Pakistan.

During the year, your Company has earned revenue of Rs. 627 Crore
(including about Rs.294 Crore from sale of products) from domestic and
International consultancy.

INTERNATIONAL COOPERATION

Once fully developed, South Asian Association for Regional Cooperation
(SAARC) Grid shall go a long way in harnessing capacities and resources
of SAARC Nations to address the growing energy needs in the region.
Your Company continues to strive for preparing a roadmap for the same.
Presently, a number of interconnections exist between India & Nepal and
India & Bhutan, which are being strengthened for mutual exchange of
power.

A milestone has been achieved in this direction with the commissioning
of an asynchronous interconnection between countries India &
Bangladesh, through 500 Mw High Voltage direct Current (HVdC)
back-to-back terminal along with Bheramara (Bangladesh) - Baharampur
(India) 400kV d/c line in September, 2013, enabling power flow of the
order of 500Mw from India to Bangladesh.

Also, for evacuation of power from various upcoming hydro electric
power projects (HEPs) in Bhutan, Punatsangchu-I HEP (Bhutan) Â
Alipurduar (India) 400kV double Circuit (d/c) line between countries
Bhutan & India, is under implementation and expected to be completed by
2015. Also, for transfer of bulk power, interconnection between India
and Nepal through 400 kV dhalkebar (Nepal) - Muzaffarpur (India) d/c
transmission line is under implementation. Feasibility study for
interconnection between India and Sri Lanka through an under-sea HVdC
bipole line is under finalization. Further, discussions for
interconnection between India and Pakistan through Amritsar (India) -
Lahore (Pakistan) line are being held at Government level.

CONTRIBUTION IN DISTRIBUTION REFORMS

Under "Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)" scheme for
rural electricity infrastructure and household electrification, your
Company has been assigned about one-third of the total works for
execution of rural electrification covered in sixty-five (65) districts
of nine (9) States in the country at a base cost of about Rs.7,230 Crore.
Most of the schemes have already been completed/ nearing completion.

During FY 2013-14, infrastructure was created for electrification in
2,388 villages out of which 2263 were partially electrified and 125
were un-electrified villages. Also, 5,315 villages were energised
including 632 un-electrified villages. Service connections were
provided to about 85,460 BPL households. Cumulatively, till March,
2014, infrastructure has been created for electrification of 71,042
villages including 32,588 un- electrified villages. Further, service
connections were provided to about 36.22 Lakh BPL households.

In addition, RGGVY works in four (4) districts of Uttar Pradesh, namely
deoria, Siddhartnagar, Pratapgarh, Kushinagar have been assigned to
your Company.

XII PLAN DEVELOPMENT PROGRAMME

Your Company has made an ambitious plan to invest more than Rs. 100,000
Crore during the XII plan, matching with the envisaged generation
capacity addition. This investment is mainly towards development of
transmission infrastructure for implementation of various inter-State
transmission systems including High Capacity Power Transmission
Corridors (HCPTCs), inter-regional links for grid strengthening, system
strengthening schemes etc.. out of the above capex-plan, your Company
has already made a capital expenditure of Rs. 43,195 Crore in the first
two years of the plan period. The funding for capital expenditure are
planned to be met through loans from multilateral institutions such as
The world Bank, Asian development Bank, Supplier Credit, External
Commercial Borrowings through bonds / notes, besides loans from
domestic market through private placement of bonds. Based on the
ratings by both domestic and international credit agencies, your
Company do not foresee any difficulty in resource mobilisation.

Your Company has planned to add transmission network comprising about
40,000 ckm of transmission lines and about 100,000 MVA of
transformation capacity during the XII Plan. out of this, the Company
has already commissioned about 13,760 ckm of EHV transmission lines and
about 81,390 MVA of transformation capacity in the first two years of
the XII Plan.

ERP IMPLEMENTATION & IT

The implementation of Enterprise Resource Planning (ERP) system for
efficient, effective and organized business process is in advanced
stage and is expected to ''Go Live'' in 2014-15. during the year, various
landmarks have been achieved by the ERP team such as finalization of
Business Blue Print for the key processes related to the Company,
mapping of the business processes on SAP ERP system, implementation of
ERP data Centre at Manesar and imparting training to around 450 power
users.

On IT front, your Company continues to espouse latest technologies for
the betterment of its business processes. Secure wi-Fi connectivity has
been provided in offices and other premises for seamless connectivity
and efficient working environment. Your Company continues to carry out
recruitment process through online application portal, which is
designed, developed and maintained by in-house talent. The same service
was also provided to few other organizations to carry out their
recruitment drive online. Further, various applications like Inspection
Management System, Vigilance Inspection System, and Attendance
Management System etc. are developed, run and maintained in-house for
assisting the business operations.

The Company has also taken up major technology upgradation of IT
infrastructure and has planned to enter cloud enabled computing
environment by next year. Apart from Consultant appointed for Cloud
Computing, your Company has also appointed a consultant for the
implementation of Information Security Management System (ISMS) and for
accrediting ISo:27001 Certification.

SUSTAINABLE DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY

Realising its obligation and commitment towards Sustainable
development, your Company has taken many initiatives such as
construction of National Transmission & Asset Management Centre (NTAMC)
Building at Manesar as per Green Rating for Integrated Habitat
Assessment (GRIHA) norms, along with 50kw solar plant, and installation
of waste Paper Recycling Plant, etc. Your Company is on the way to
progressively phase out the use of conventional paper and its
procurement in Corporate office as the Company''s letterheads, visiting
cards,envelopes, writing pads etc. are being prepared with recycled
paper produced in-house. These initiatives are not only testimony of
Company''s commitment towards Sustainable development but a firm step in
conserving precious ecological resources and reduction of carbon
footrpint.

Your Company feels the social pulse of the milieu in which it operates.
It believes in inclusive growth and undertakes various social
initiatives emphasizing on socio-economic and integral development of
areas / communities primarily in and around its areas of operations.
with this approach, the Company carries out various community
development activities such as Skill development & Capacity Building,
livelihood generation, healthcare, education, plantation, sanitation,
drinking water, besides infrastructure developments like classrooms,
roads, community centres etc..

During the year under review, the Company trained sixty-two (62) youths
under the ''Skill development Programme on Transmission line Tower
Erection'' in the backward district of Kokrajhar, Assam. other skill
development / livelihood training programs imparted to unemployed youth
are in the field of tailoring, cutting/ stitching, embroidery,
automobile repairing, handloom weaving, food & fruit processing,
repairing of household appliances, etc. to secure employment or to be
self-employed. The Company also installed hand pumps and improved
drainage facilities in Banka (Bihar). The Company also provided 1109
mandays training to employees/ other stakeholders on CSR/
sustainability/ environment conservation. Besides above, energy
conservation techniques were installed in five (5) substations
establishments under CSR. The Company also published Annual CSR &
Sustainability Performance Report for 2012-13 and Annual Target Booklet
for 2013-14. Your Company also initiated a project on restoration of
village ponds in Chhattisgarh. during the FY 2013-14, the Company made
an expenditure of Rs. 21.66 Crore on CSR activities, 0.51% of PAT of the
preceding year.

Under its Corporate Social Responsibility initiative, your Company has
entered into an agreement with AIIMS, New delhi in March, 2014 for the
construction of a 10 storey, 325 beds dharamshala named as (POWERGRID
Vishraam Sadan)" inside the premises of Jai Prakash Narayan Apex Trauma
Centre (JPNATC), New delhi.

Memorandums of Understanding (MoUs) were also signed with International
Crop Research Institute for Semi-Arid Tropics (ICRISAT) for water shed
management projects in one village each in Andhra Pradesh and
Karnataka.

Your Company extended a financial assistance to ''Chief Minister''s
Relief Fund'' for mitigating the sufferings of the victims of cyclone
''Phailin'' in odisha. Employees of your Company have also contributed
their one day salary to the ''Prime Minister''s Relief Fund'' for
assisting flood victims of the State of Uttarakhand.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital

Employees are the pillars of your organization. during FY 2013-14, your
Company inducted two hundred sixty-nine (269) personnel at various
levels viz. Executives, Supervisors, workmen. while executives were
recruited through open advertisement on all India basis/ campus
selection from reputed engineering and management institutes,
recruitment of non-executives were carried out through employment
exchanges and local advertisement at regional level.

Your Company''s Human Resource development is primarily aimed at
learning new competencies, reinforcing good work practices & workplace
behaviour, as per organizational needs. The Company encourages
innovation, meritocracy and the pursuit of excellence. Employees are
synchronously updated and upgraded with changes in technology, strategy
and growing competitive business environment, in terms of their
knowledge, skill and outlook.

Your Company continue to assess the developmental needs of the
employees using online ''Training Need Assessment'' process and link the
same with the organisational/ business necessities to enrich its
employees with requisite proficiencies. Further, trainings on latest
technology and certification courses such as certified Project
Management & Risk Management programmes, Latest survey techniques & PLS
CAdd, Networking Skills, Hands on training on Transformer & Reactor are
promoted to enable employees to be in line with the best in class.
during the year, an average 5.96 training mandays / employee was
achieved towards training in areas of management development,
technological development, behavioural development, etc.

To establish new business area of Energy Auditing, your Company trained
additional group of executives for National Certification Examination
for Energy Auditors and subsequent accreditation by Bureau of Energy
Efficiency (BEE).

Also, for enabling senior executives in their career advancement,
Transformational Leadership Programme (TLP) and Transformation
Management Programmes (TMP) were conducted at reputed institutions.
Apart from focussed functional and behavioural development of its
employees, your Company also conducted Programmes on women Empowerment
and Empowerment of employees by self-growth (for reserve category
employees) and special programme for differently abled employees.

As a part of your Company''s Competency Assessment and Skill Gap
Analysis, Corporate HRd, along with external consultant, has updated
the Competency directory (both functional and behavioural) for various
functions in the Company keeping in view the existing/ emerging
business of your Company. Based on this analysis, updated directory
assessment centre of one hundred thirty-three (133) nos. executives of
deputy General Managers (dGMs) level across the Company has been
completed.

Further, for overall skill development in the country, particularly in
the area of Power Transmission Line Construction, Capacity Building
Programmes are being conducted with the help of Transmission Line (TL)
construction contractors under Public Private Partnership (PPP) mode.

To leverage capabilities and resources with other institutions in the
area of training, your Company, during FY 2013-14, signed MoUs with
IIT, Roorkee, ASCI, Hyderabad, Fore School of Management, New delhi,
Asia Pacific Institute of Management, New delhi, Jaipuria Institute of
Management, Noida and ITM University, Gurgaon. POWERGRID Academy of
Leadership (PAL) being established by your Company at Manesar, near
Gurgaon is in advanced stage of completion and expected to reap the
benefits soon.

As a part of HRd consulting, your Company trained power professionals
from both domestic and overseas utilities, including SAARC nations.

Employee Welfare

Your Company regards its employees as its core strength and, thus,
undertakes requisite changes in various policies from time to time for
their welfare.

A focused initiative to build employee health and well-being is also in
place. The program creates awareness on prevention of lifestyle
diseases, encourages employees to make positive health choices and
builds a healthy workplace. Similarly, several welfare initiatives such
as yoga, counselling, recreational and developmental programmes are
available to the employees and their families to promote work-life
balance. Eleven (11) Nos. of medical and health check-up camp were
organized for employees by your Company.

Your Company has a very effective Grievance Redressal System through
which almost all the grievances of the employees are settled, leading
to employee satisfaction. These consistent efforts in all directions
have resulted in very low attrition rate of less than 1% during the
year under review.

During the year, your Company formed ''Internal complaints committees''
as per Sexual Harassment of women at workplace (Prevention, Prohibition
and Redressal) Act, 2013, reflecting its commitment to provide a safe
and caring environment to female employees.

Your Company successfully continues to address the issues related to
workmen through the National and Regional Bipartite Committee (PNBC/
PRBC), a joint consultative forum comprising management and workmen
representatives. during the year, four (4) meetings with the employees''
representatives were held and the Industrial Relations scenario in the
Company has been cordial, leading to no man day loss.

Quality food is served to the employees in the ISo 22000:2005
accredited Cafeteria in the Corporate office and Food Lounge of Multi
Purpose hall of your Company. Healthy community living is spread
through periodically conducted cultural programmes for celebrating
various occasions like Independence day, Republic day, diwali
get-together, Holi Milan, New Year, Raising day, etc. in all
establishments of the Company.

The Company also conducts various sports competitions, for boosting the
interest of employees in sports and games, at intra and inter-regional
level for Kabaddi, Cricket, Volleyball, Badminton etc. and participates
regularly in Inter-PSU Sports meet also.

Citizen''s Charter

Citizen''s Charter has been formulated for the Company providing a
visible front of its vision, mission, objectives, commitments, terms of
service and its obligation to various stakeholders. In this,
information is available about Company''s schemes, policies, project
plans of the corporation and issues of general interest to
stakeholders.

Implementation of Official Language

In compliance with the official Language Act, 1963, official Language
Rules, 1976 and orders issued by the Government of India from time to
time, efforts were made to increase use of Hindi in official work
during the year. In all offices of the Corporation, Rajbhasha
Committees are functioning for overseeing implementation of official
Language effectively and to review the progress of implementation
including adherence to policies and the Annual Programme as circulated
by the deptt. of official Language, Govt. of India. Your Company is
continuously making efforts for the propagation and successful
implementation of the official Language Policy. The official Language
Implementation Committees both at Corporate and Regional levels held
their quarterly meetings regularly to monitor and review the progress
made in this direction.

Various forums such as Parliamentary Committees on official Language,
Advisory Committee on official Language and Town official language
Implementation Committee (ToLIC) have applauded the efforts taken by
your Company for implementing Rajbhasha. Your Company also received
many accolades on Rajbhasha implementation.

Corporate Image through Communication Management

Communication Management is essential for establishing a strong
Corporate Brand Identity and for strengthening the relationship with
its stakeholders.

With the ever increasing competition amongst the corporate majors
across the globe, Globalisation has manifested its trait making it
obligatory for the corporate giants to establish and maintain a strong
mutual understanding between the organisation and its stakeholders
through well planned and persistent communication interventions
dedicated with the aim to acquire and retain good reputation for the
Company. Bearing in mind the need for sustained, timely and bona fide
communication interventions, your Company has adopted various
communication strategies to appropriately highlight itself as an
infrastructure major contributing substantially towards development of
a sturdy national economy.

Your Company has been issuing various press communiqué for highlighting
achievements, growth, recent developments, thereby maintaining a
regular interaction with the masses. The Company also organises
Quarterly Press & Analysts'' Meet to facilitate face to face interaction
of the management with the eminent journalists, analysts and
stakeholders. This has helped in winning the trust of the masses and
stakeholders.

During the execution of the Company''s second Follow-on Public offer,
the focal strengths and expertise of the Company were presented to the
investors in various campaigns comprising print and electronic media,
outdoor hoardings including investor road shows on pan India basis.

Your Company also participated in the India International Trade Fair
(IITF) 2013 exhibition by displaying a stall based on the theme of
inclusive growth. Your Company also participated in business oriented
exhibitions in Mumbai and delhi and in the country of Tanzania during
the year to reach out to focal clients and the common masses.

Your Company successfully organised the GRIdTECH 2013, the 4th
International Exhibition and Conference on Transmission, distribution,
Smart Grid, Renewable Energy and Load dispatch in which a large number
of exhibitors showcased their state-of-the-art products in the field of
transmission, distribution, grid management, and smart grid. one of the
distinct features of the exhibition was ''Student Innovation Centre''
wherein students from a number of engineering colleges displayed their
projects mainly in the areas of Smart-Grid, Robotics, etc.

RIGHT TO INFORMATION

In order to promote transparency and accountability, an appropriate
mechanism has been set up across your Company in line with ''Right to
Information Act, 2005''. Your Company has nominated CPIo/ Appellate
Authorities at its Corporate office and Regional offices across the
country to provide required information to the citizens under the
provisions of Act.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FuNCTION

Good governance plays a very significant role in building the trust of
the Stakeholders and eventually in making an organization successful
and sustainable. with this goal, your Company strives to focus mainly
on preventive Vigilance and achieve good governance by emphasising
transparency, integrity, accountability, fairness, equity and adherence
to rules, regulations and the laws of the land.

Your Company uses technology in the form of e-payments, e-billing,
e-procurement and reverse auction, e-auction, uploading of contract
documents as well as award details, vendor registration, online
tracking of bill status, online inspection Management system, etc. for
preventive action. Vendor meets have also been conducted as a step
towards confidence building of stakeholders. As part of Preventive
Vigilance, various inspections, in the form of surprise and process
online were conducted, apart from CTE type inspections. Adequate cost
compensations were effected on cases not conforming to technical
specifications or conditions of contract. A number of complaints,
received from internal as well as outside agencies, were taken up for
verification, earnestly. on the basis of investigations conducted into
these complaints, disciplinary actions, wherever appropriate, were also
initiated. The Vigilance department has, on its part, also introduced a
number of measures to inculcate good governance within the
organization. while, process on line inspection are being conducted at
the regions of works which are at a critical stage of execution, bulk
SMS are being sent to all employees regularly in order to acquaint them
with Conduct, discipline and Appeal Rules. online complaint handling
system and continuous improvement in systems and procedures are also
steps taken in the same direction. during the year FY 2013-14, the
Company continued its focus on the following spheres of functioning,
like communication of assessment to the concerned bidders,
incorporation of provision relating to conflict of interest,
installation of surveillance cameras to increase security, putting
contract evaluation rooms under IT enabled surveillance, storage of
materials at construction sites, etc.

Pursuant to vigilance observations, system improvement has been taken
up in areas such as classification for foundations of tower,
identification of safety measures to be exercised during the erection
in transmission lines, adherence to specifications & field quantity
norms and adoption of common approach for preparation of cost
estimates. Further, as a part of capacity building, your Company
conducted various workshops on Preventive Vigilance, Ethics and on the
RTI Act, both at Corporate Centre and in the Regions.

Your Company organized ''Vigilance Awareness Week 2013'', under the theme
"Promoting Good Governance Â Positive Contribution of Vigilance",
during which various competitions were organized for the employees as
well as for their family members. In addition, talk on ethics & values
and on anti-corruption topics were delivered by eminent personalities.

ACCOLADES & AWARDS

The excellent performance of your Company has been recognised and
appreciated by the Govt. of India and other prestigious organisations &
institutions in form of various awards/ accolades in various categories
from time to time.

Your Company has been rated ''Excellent'' for its performance as per MoU
2012-13 signed with the Ministry of Power.

Your Company also received four (4) Gold Shields and one (1) Silver
Shield under ''Comprehensive Award Scheme for recognizing meritorious
performance in Power Sector'' for Transmission System Availability and
Early Completion of Transmission Projects for the year 2011-12 and
2012-13 from Ministry of Power.

Your Company was also conferred Award for Corporate HR Excellence in
Power Sector by 7th ENERTIA Awards 2013, for being India''s best place
to work for Power Professionals and Power Engineers and "e-India PSE
2013 Award" for its "online Human Resource development Management
System".

Your Company was conferred the Power Line Award 2013 for being the
''Best Performing Transmission Company''.

Your Company was bestowed with "Top Infrastructure Company" under the
category ''Power Transmission'' by dun & Bradstreet.

during the year 2013, your Chairman & Managing director was ranked in
''2013-All Asia executive Team Â Best CEos'' by ''Institutional
Investors'', a highly rated North American magazine on international
financial market matters.

Your CMd has also been conferred with the "Eminent Electrical Engineer
Award" by the Institution of Engineers (India), the largest
professional body of Engineers in India.

Your Company has won the runners-up trophy of National Championship of
Business Management Simulations - 2013 conducted by All India
Management Association (AIMA) and represented India in the Asian
Championship.

MANAGEMENT DISCuSSION AND ANALYSIS

In addition to the issues in the directors'' Report, some issues have
been brought out in report on Management discussion and Analysis placed
at Annexure-I of this Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 of the
Listing Agreement with the Stock Exchanges is given in Annexure-II and
forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The particulars of employees of the Corporation who were in receipt of
remuneration in excess of the limit prescribed under Section 217 (2A)
of the Companies Act, 1956 is given in Annexure-III to this Report.

As per requirements of disclosures under Section 217(1) (e) of
Companies Act,1956 read with Rule 2 of the Companies (disclosures of
Particulars in the Report of Board of directors) Rules, 1988
information relating to conversation of energy, technology absorption
and foreign exchange earnings and outgo, information is given in
Annexure-IV to this Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has received ''NIL'' comments on the accounts for the year ended
March 31, 2014 by the Comptroller and Auditor General of India under
Section 619(4) of the Companies Act, 1956. Copy of the same is attached
in Annexure-V to this Report.

CORPORATE GOVERNANCE

A report on the Corporate Governance (Annexure-VI), forming part of
this report, together with the Certificate thereon is given in
Annexure- VII to this report.

Your Company has got its Secretarial Compliance Audit conducted for the
financial year ended March 31, 2014 from M/s Chandrasekaran &
Associates, Practising Company Secretary. Their Report forms part of
this Annual Report (Annexure-VIII).

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

The statement pursuant to Section 212 of the Companies Act, 1956
relating to Subsidiary Companies forming part of this Report is given
in Annexure-IX.

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller
& Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee &
Co., and M/s Sagar & Associates were appointed as Joint Statutory
Auditors for the financial year 2013-14.

COST AUDITORS OF THE COMPANY

Your Company appointed M/s. K. G. Goyal & Associates and M/s. S. C.
Mohanty & Associates as Cost Auditors for the Financial Year 2013-14
under Section 233B of the Companies Act, 1956.

The due date for filing Cost Audit Reports for the financial year
2013-14 with the Cost Audit Branch, Ministry of Company Affairs is
September 30, 2014 and the same will be filed within the stipulated
time.

COMPANY''S BOARD

Your Company''s composition of Board of directors underwent some changes
during the year 2013-14. Shri Rakesh Jain, JS&FA, MoP, and Smt. Rita
Acharya ceased to be directors on the Board of the Company w.e.f. July
08, 2013 and February 28, 2014, respectively. The Board wishes to place
on record its deep appreciation and gratitude for the significant
contribution and support to the Company extended by Shri Rakesh Jain
and Smt. Rita Acharya during their tenure as director of the Company.

Dr. Pradeep Kumar, Joint Secretary & Financial Advisor (JS&FA),
Ministry of Power (MoP) was appointed on the Board w.e.f. September 10,
2013 and Smt. Jyoti Arora Joint Secretary (Transmission) was appointed
on the Board w.e.f. March 20, 2014.

In accordance with the provisions of Section 152 of the Companies Act,
2013 read with Article 31 (iii) of the Articles of Association of the
Company, Shri R.T. Agarwal, director (Finance) and Shri I.S. Jha,
director (Projects) shall retire by rotation at the Annual General
Meeting of your Company and being eligible, offer themselves for
re-appointment.

ACKNOWLEDGEMENTS

The Board of directors, with deep sense of appreciation, acknowledges
the guidance and co-operation received from Govt. of India,
particularly Ministry of Power, Ministry of Finance, Ministry of Home
Affairs, Ministry of External Affairs, Ministry of Statistics and
Programme Implementation, Ministry of Environment & Forests, Central
Electricity Regulatory Commission, Appellate Tribunal for Electricity,
Central Electricity Authority,

Planning Commission, department of Public Enterprises, Regional Power
Committees, and other con cerned Govt. departments/agencies at the
Central and State level as well as from Securities and Exchange Board
of India, National Stock Exchange of India Ltd. and BSE Ltd., Mumbai
without whose active support, the achievements of the Corporation
during the year under review would not have been possible.

Board''s special appreciation and thanks are to our valued customers,
State Governments and State power utilities and other clients, who have
awarded various consulting works and reposed faith in Company''s
capability to handle them. The Board also appreciates the contribution
of Contractors, Vendors and Consultants for successful implementation
of various projects by the Company.

The directors take this opportunity to thank the Principal director of
Commercial Audit and Ex-officio Member Audit Board-III for the
cooperation during the year. directors also acknowledge the valuable
suggestions and guidance received from the statutory auditors during
the audit of accounts of the Company for the year under review. The
Board also conveys its sincere thanks to national/ international
financial institutions/ multilateral Financial Institutions (The world
Bank & Asian development Bank)/ Banks/ national (ICRA & CRISIL) &
international (Standard & Poor and Fitch) credit rating agencies for
their assist ance, continued trust and confidence reposed by them on
POWERGRID.

On behalf of Board of directors, I would like to place on record our
deep appreciation of the dedicated efforts and valuable services
rendered by the members of the POWERGRID Family in the Company''s
achievements during the year 2013-14. I would also like to thank the
Executive team for their strong leadership, the employee unions for
their support and all our employees for their commitment and enthusiasm
to achieve our aim to be the world''s premier transmission utility.

The am delighted to present, on behalf of the Board of Directors, the
24th Annual Report on the performance of your Company during the
financial year ending March 31, 2013 together with Audited Statement of
Accounts, Auditors'' Report and Review of the Accounts by the
Comptroller and Auditor General of India for the review period.

Your Company has earned the reputation as one of the largest and best
managed transmission utilities in the world with its remarkable growth
in the last two decades and carries about half of the country''s total
generated power. Your Company continues to play a critical role in
development ofthe Country''s power sector with its various
techno-managerial initiatives in inter-State power transmission system
along with transparent and effective grid operation in the Country.

Your Company has been selected for ''MoU Excellence Award'' for FY
2010-11 by Department of Public Enterprises (DPE), Ministry of Heavy
Industries & Public Enterprises for being the top performer in the
Energy Syndicate. Further, based on overall performance, the Company
has been rated ''Excellent'' by DPE for the FY 2011-12. Based on the
approved score, POWERGRID stand top among the assessed Companies in the
Power Generation and Transmission syndicate for the FY 2011-12 and
expected to receive the "MoU Excellence Award" again.

Your Company has put on a remarkable performance in FY 2012-13 with
achievements exceeding most of the targets under Memorandum of
Understanding (MoU) signed with Ministry of Power (MoP), Government of
India and poised to get ''Excellent'' rating for FY 2012-13; continuously
since signing of its first MoU in FY 1993-94.

Performance highlights of the Company during FY 2012-13 are briefly
mentioned here to give an overview of accomplishments in all fronts:

- Made an investment of Rs.20,037 Crore, an increase of about 13%
over last year.

- 1200kV Ultra High Voltage (UHV) AC National Test Station at Bina,
Madhya Pradesh was test charged and then dedicated to the Nation by
Hon''ble Union Minister of State (l/C)for Power.

- Attained 99.90% Transmission system availability with number of
trippings per line limited at 0.58.

- Inter-regional power transfer capacity of National Grid has been
enhanced by 2,000 MW in the year and cumulative capacity stood at about
29,750 MW by end of March, 2013. Further, in the month of May 2013, the
inter-regional power transfer capacity has been increased by 2,100 MW
to 31,850 MW.

FINANCIAL PERFORMANCE (Figures in Rs. crore, except per share data)

Description 2012-13 2011-12 Y-o-Y Growth

Income

Transmission Charges 12,163 9,544 27.4%

Consultancy 315* 290 8.6%

Telecom 231 201 14.9%

Other Operating Income 49 129 (62.0%)

Other Income 571 621 (8.1%)

Total Income 13,329 10,785 23.6%

Profit After Tax (PAT) 4,235 3,255 30.1%

Earnings per Share (Rs.) 9.15 7.03 30.2%

Book Value per Share (Rs.) 56.62 50.73 11.6%

Gross Fixed Assets 80,600 63,387 27.2%

Long term borrowing ** 66,188 51,752 27.9%

Net Worth 26,213 23,488 11.6%

Debt Equity Ratio 72:28 69:31

Commercialisation of Assets 17,213 13,045 31.95%

*including consultancy income from sale of products **including
current maturities of long term borrowings

OPERATIONAL EXCELLENCE

Transmission assets owned and operated by your Company as on April 1,
2013 has crossed the benchmarking values of 1,00,000 Ckm & 1,50,000 MVA
and stands at about 1,00,200 Ckm of Extra High Voltage (EHV)
transmission lines, 167 EHVAC & High Voltage Direct Current (HVDC)
sub-stations and 1,64,763 MVA transformation capacity which spread over
the length and breadth of the country. Using this vast transmission
network your Company wheels about 50% of the total power generated in
the country.

During the year 2012-13, the average availability of these transmission
systems was maintained at 99.90% by your Company with the number of
trippings per line limited at 0.58. This high availability of
transmission network is consistently maintained by your Company through
deployment of technologically advanced operational techniques such as
Hot Line Maintenance, Hotline Washing of Insulators with the use of
helicopters, Equipment Condition Monitoring techniques including
Dynamic Testing of relays, Thermo-vision Scanning, Frequency Response
Analysis (FRA) for transformers and reactors, large scale automation of
sub-stations, etc. Presently, 43 sub-stations of your Company are being
operated remotely and many new sub-stations are being designed for
remote operation.

The establishment of the "National Transmission Asset Management Centre
(NTAMC)" for centralised remote monitoring, operation & control of
sub-stations is nearing completion which will further improve the
efficiency and transparency in the operation of the transmission system
in the Country.

Your Company has developed for implementing a "Maintenance Service Hub"
concept in which specialist manpower is pooled into a hub for
undertaking the maintenance of number of sub-stations within a close
range. This innovative concept shall enable your Company to enrich your
manpower with the multifarious knowledge of its huge network of
transmission lines & substations with various types of equipments in
terms of makes, technology and ratings.

These technological interventions shall also facilitate rationalization
of manpower in the field of O&M and this year your Company has achieved
more than 1% manpower rationalization on this account.

Your Company has taken a proactive step to restrain the trippings of
transmission lines caused due to fog and pollution in various parts of
the country by replacing the conventional insulators with polymer
insulators. Replacement of insulators in the critical lines / stretches
in Northern Region has been completed and replacement of insulators in
other parts ofthe country is in progress. This has significantly
reduced pollution related trippings in the country. Further, to
facilitate optimum selection of insulators for new transmission lines,
your Company is conducting pollution mapping in Northern Region and
these pollution measurements are being carried out at more than 150
locations ofthe Company and 108 locations ofState Transmission
Utilities (STUs). These corrective measures will further minimize the
probability of occurrence of flashover in lines passing through
pollution affected areas besides optimization of transmission line
cost. Pollution mapping of Southern and Eastern Regions are also being
taken up by your Company. In addition, advance actions are being taken
like cleaning of conventional insulators as a part ofwinter
preparedness in less polluted stretches to avoid pollution related
trippings.

Your Company has placed state-of-the-art Emergency Restoration Systems
(ERS) for transmission lines at strategic locations to enable
restoration within shortest possible time of collapsed transmission
line towers caused by the eventualities of natural calamities such as
earthquake, cyclone, landslide, & sabotage, etc. Additionally, to
alleviate the similar eventualities in case of substations, your
Company is in the process of procuring a mobile 400/220 kV ERS for
substation for quick deployment & restoration of 400kV substation in2to
4 weeks time which otherwise takes several months.

Your Company''s vast nationwide spread transmission network passes
through various geographical areas including tough terrains such as
snow bound area, deep forest. In these terrains to monitor the
condition of transmission lines, a faster and efficient patrolling
system was necessitated. Taking this into consideration, your Company
has taken up aerial patrolling of transmission lines using helicopters
for identifying visual and thermal defects in transmission lines caused
due to environmental stresses and thereby to minimize the breakdown
nature of maintenance work. To start with this, award for aerial
patrolling through helicopters of about 15,000 route kms of
transmission lines has already been placed. Further, your Company is
also exploring more contemporary techniques such as Robotic Technology
for condition monitoring of conductor, earthwire & hardware, etc.

PROJECT IMPLEMENTATION

Best efforts are being put in by your Company for implementing its
transmission projects within stipulated time frame to derive commercial
benefits. Your Company has developed the Integrated Project Management
and Control System (IPMCS) for effective planning, implementation,
monitoring and management of the transmission projects. Further, to
optimise the implementation time schedule of the projects, various
actions have been undertaken including total project review and
monitoring using IPMCS and Project Review Meetings at regular intervals
through video conferencing. Pre-emptive measures and advance actions on
various project linked activities such as land acquisition,
state-of-the-art survey techniques and soil investigations, tender
activities, funding tie-up, etc., were also undertaken in parallel with
project investment approval process.

These well developed system of implementation process has once again
resulted in exceptional output and projects worth about Rs.17,213 Crore
were commercialised during the year, adding about 7,156 Ckm, 17
sub-stations and transformation capacity of more than 40,230 MVA in the
transmission system. Your Company also timely commissioned notable
major 765kV and 400kV transmission lines such as 765kV
Sasan-Satna-Bina, 765kV Fatehpur-Agra, 765kV Moga-Bhiwani,
765kVJhatikalan-Bhiwani, 400kV D/C Maithon-Koderma, 400kV D/C
Mundra-Jetpur, 400kV D/C Chamera Pooling Station-Jallandhar, 400kV D/C
Raipur-Wardha inspite of severe constraints faced including
challengingterrains, severe Right-of-Way(RoW) problems.

Implementation of High Capacity Power Transmission Corridors (HCPTCs)
is progressing as per schedule with completion in a phased manner
matching with generation projects. In fact, some of the elements under
HCPTCs of Chhaffisgarh and Odisha have already been commissioned in FY
2012-13 and balance elements of HCPTC''s are expected to be completed
progressively by FY 2015-16.

During the year, 24 new projects with an estimated cost of about Rs.
12,579 Crore involving about 5,530 Ckt km of transmission lines, 4 new
sub-stations and transformation capacity of about 12,730 MVAand supply
& installation of 5,207 km of OPGW fibre optic cable were approved and
taken up for implementation.

FINANCIAL MANAGEMENT

The Financial performance of your Company in FY 2012-13 has been
impeccable, achieving a turnover of Rs.13,329 Crore and Net Profit of
Rs.4,235 Crore as compared to Rs.10,785 Crore and Rs. 3,255 Crore
respectively during FY 2011-12, growth of about 24% in turnover and 30%
in Net Profit. The gross asset base of the Company has been enhanced to
Rs.80,600 Crore from Rs. 63,387 Crore in 2011-12, an increase ofabout
27%.

Your Company continues to show improved performance in all its business
areas including Telecom and Consultancy businesses, enhancing the value
for the shareholders.

Capital Investment and Fund Mobilization

Your Company continues to explore new opportunities for raising long
tenure debt from both domestic and international debt investors, for
meeting its capex-programme in XII Plan, in addition to debt funding
from multilateral funding agencies like The World Bank and ADB.

In this direction, during the year, your Company signed loan agreements
with International Finance Corporation (IFC) and Infrastructure Crisis
Facility Debt Pool Limited Liability Partnership (ICF Debt Pool LLP) in
July, 2012 for a total amount of US$270 million for funding various
transmission projects. Further, your Company made its maiden foray into
foreign currency markets in January, 2013 and raised US$500 million
through issuance of 10 year Foreign Currency Bonds (FCB) at an
attractive coupon rate of 3.875% p.a. This maiden issue from your
Company received an overwhelming response from the investing community
and was over-subscribed nearly 19 times. The Bonds are currently listed
in Singapore stock exchange.

In line with its targeted XII Plan capex-programme, your Company during
the financial year 2012-13, made a capital investment of Rs. 20,037
Crore which was about 13% higher than last year. AboutRs. 15,700 Crore
of the capital investment was mobilised through private placement of
bonds in domestic market with attractive coupon rates, Supplier''s
credit, proceeds of ongoing SBI Line of Credit, foreign currency bonds
and loans from IFC, ICF Debt Pool LLP, multilateral funding agencies
like The World Bank, Asian Development Bank etc. In addition, the
accrued internal resources and FPO proceeds amounting to about Rs.4300
Crore were utilized for funding equity component of the Company.

During the FY 2012-13, your Company was rated by International credit
rating agencies, Standard & Poor''s Rating Services (S&P) and Fitch
Ratings, for the first time. Both the agencies have rated your Company
at BBB - (outlook negative), consistent with Gol Sovereign Rating.
Consequent upon revision of Sovereign rating to ''Stable'' from
''Negative'' recently by ''Fitch Ratings'', the rating of your Company now
stands as BBB- (outlook Stable). The Company continues to have its
rating as AAA/stable (triple AAA with stable outlook) by CRISIL, ICRA
and CARE ratings domestically.

Dividend Payout

For FY 2012-13, your Company has proposed a final dividend ofRs. 1.14
per share in addition toRs. 1.61 per share of interim dividend paid in
February, 2013. The final dividend shall be paid after your approval
at the Annual General Meeting. Thus total dividend payout for the year
amounts to Rs. 1,273.18 Crore (including an interim dividend of Rs.
745.39 Crore) as against Rs. 976.89 Crore paid during the previous
year. The total dividend payout including dividend tax accounts for
34.99% of Profit after Tax of the Company.

Your Company values its shareholders and hence determined to pursue its
dedication to build and maintain relationships with them by creating
wealth for its stakeholders through deploying cutting edge technology,
adopting global best practices, optimum utilization of resources and
sustainable development.

i. In the preparation of the Annual Accounts, the applicable
accounting standards have been followed;

ii. The Directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view ofthe state of affairs
ofthe Company at the end ofthe financial year and of the profit of the
Company for that period;

iii. The Directors have taken proper and sufficient care in accordance
with the provisions ofthe Act for safeguarding the assets ofthe Company
and for preventing and detecting fraud and other irregularities;

iv. The Directors have prepared the annual accounts on a going concern
basis.

COMMERCIAL PERFORMANCE

With effective from July 1, 2011, Point of Connection (PoC) Charges
tariff sharing mechanism has been implemented in the transmission
sector for Sharing of Transmission Charges and Losses through Central
Electricity Regulatory Commission Regulations, 2010. As the Central
Transmission Utility (CTU) ofthe Country, your Company has also been
assigned the responsibility of carrying out activities like raising of
transmission charge bills on behalf of all the Inter-State Transmission
System (ISTS) Licensees (presently 13 nos.), collecting the amount and
disbursing the same to them. In this regard bills of transmission
charges are prepared, raised and uploaded on the website portal for
about 71 Designated ISTS Customers (DICs) including payment details by
the customers.

It is a matter of pride that in FY 2012-13, Your Company had achieved a
100% realisation of transmission tariff with highest ever monthly
realization of transmission tariff achieved in the month of March,
2013.

DEVELOPMENT OF NATIONAL GRID

Recognizing the need for development of National Grid, thrust was given
to enhance the capacity of National Grid in a phased manner. In this
direction, your Company had established/ planned various inter-regional
links as a part of different generation projects/grid strengthening
schemes. The Inter-regional power transfer capacity ofthe National grid
has been planned to increase to about 65,550 MW at the end of XII Plan,
by adding about 38,000 MW during XII Plan matching with generation
capacity addition programme and power transfer requirement across the
regions. In line with this, your Company has added 2,000 MW of
inter-regional power transfer capacity in FY 2012-13 through
upgradation of both 765 kV Gwalior-Agra single circuit transmission
lines to 765 kV voltage level from 400 kV voltage level. The cumulative
inter-regional powertransfer capacity at the end of first year ofthe
XII plan stood at about 29,750 MW.

All India synchronous grid is envisaged for facilitating bulk transfer
of power across regional boundaries and to achieve optimal utilization
of the resources in the Country. Towards this, presently regional grids
of Northern, Eastern, Western and North-Eastern Regions (NEW grid) are
already connected through synchronous interconnections and Southern
Region (SR) is connected to this NEW grid through over4,000 MW capacity
HVDC links. Synchronous interconnection of SR with NEW grid is
envisaged through high capacity 765 kV S/c Raichur - Sholapur lines (2
Nos.). One of the above lines is under implementation by private sector
and the other line is being implemented by POWERGRID. Both the lines
are envisaged to be completed by 2014.

GRID MANAGEMENTAND OPEN ACCESS

Your Company has been instrumental in providing an efficient, reliable,
smooth and transparent grid operation and management in the Country.
The grid management function in the Country is continued to be looked
after by Power System Operation Corporation Limited (POSOCO), a fully
owned subsidiary of your Company, with its state-of-the-art Unified
Load Despatch & Communication facilities. These facilities are being
updated continuously to further improve quality and economy in
operation of power systems besides improving data availability,
visibility and transparency.

Your Company''s strong transmission network and modernised RLDCs have
facilitated about 66 billion units (BUs) of inter-regional energy
transfer across the Country during FY 2012-13, as compared to previous
year''s energy transfer of about 59 BUs, meeting more demand in energy
deficit regions.

During the year, 32,139 transactions involving about 73 BUs of energy
were approved under Short Term Open Access (STOA) compared to 24,111
transactions and about 67 BUs of energy during FY 2011-12.

Your Company, as CTU, is the nodal agency for processing & grant of
Connectivity, Long Term Open Access/ Long Term Access (LTOA/LTA) and
Medium Term Open Access (MTOA) of various applicants. Towards this, as
on March 31st, 2013, the Company had granted LTOA/LTA to 151 nos. of
applicants with 83,060 MW LTA capacity out of 214 applications with
LTOA/LTA sought for about 1,29,408 MW. Some of the LTOA/ LTA
applications were withdrawn/closed due to non-satisfactory progress
ofthe IPP generation projects. Further, POWERGRID received 180
Connectivity applications for about 1,74,450 MW, out of which
connectivity has been granted to 80 nos. of applications for 69,074 MW.
The MTOA was granted to 44 nos. of applications for 4,267MW. 27 nos. of
MTOA applications were withdrawn/closed as the complete Available
Transfer Capability (ATC) was already allocated and some applications
are under process.

Unfortunately, there were two major grid disturbances on 30th and 31st
July, 2012, which resulted in failure of Northern Regional Grid in
first day and that of Northern, Eastern and North-Eastern regional
grids by the disturbance occurred on the following day. Restoration
ofthe affected areas was taken up immediately on both the days and
majority system was normalized in about six to eight hours on
respective days itself. An Enquiry Committee headed by Chairperson, CEA
was constituted by Gol for investigation of causes for these two grid
disturbances in July, 2012. Government of India is monitoring the
implementation ofthe Enquiry Committee''s recommendations. Various
measures are being taken by POWERGRID, POSOCO and Government of India
for secure grid operation such as third party protection audit,
advising State utilities to maintain grid discipline & draw power from
grid within the schedule, formulation of Islanding schemes in different
States, review of Unscheduled Interchange (Ul) mechanism, preparation
of comprehensive defence plan covering under-frequency, rate of change
of frequency under voltage, system protection schemes to cover large
generation and transmission line outages, advise to utilities to
prepare outage plans for generating units and transmission lines in
consultation with Regional Power Committees and review of transmission
planning criteria, etc. Further, petitions have also been filed in
Central Electricity Regulatory Commission (CERC) by various Regional
Load Despatch Centres including the National Load Despatch Centre on
various issues inter-alia, modification in congestion charge procedure,
modification in Ul charges and related matters, further tightening the
frequency band, primary response from generators etc. In addition,
Government of India is contemplating necessary amendments in
Electricity Act, 2003 for mitigating the issues in Grid Operation.

QUALITY MANAGEMENT

Your Company with an aspiration to achieve absolute customer
satisfaction is continuously endeavouring to provide cost effective &
quality services to its valued customers. To achieve this, the Company
is taking necessary steps to implement requisite quality measures in
each and every step of its chain of operation right from
conceptualization of project to commissioning and subsequently during
operational phase. Your Company is following Standard Manufacturing
Quality Plan at both national & international level while inspection at
various manufacturing stages and also adheres to standard Operation and
Maintenance (O&M) manuals for operation & maintenance of its
transmission system. Further, to improve quality, various techniques
are being adopted to identify the areas of improvement and develop
action plan for continuous quality improvement in all of its
activities.

During the year 2012-13, the certification on Integrated Management
System was reviewed and revised certification was acclaimed based on
the evaluation of implementation of latest systems and procedures. Your
Company is presently certified for Integrated Management System as per
Publicly Available Specification, PAS 99:2006 integrating requirements
of ISO 9001:2008 (Quality Management System), ISO 14001:2004
(Environment Management System) and OHSAS 18001:2007 (Occupational
Health & Safety Management System). Your Company has re-confirmed its
certification of the entire Corporation for Social Accountability
Standard (SA 8000:2008) after auditing of its establishments for social
accountability systems.

Capacity building, being one ofthe major challenge specially in
multi-tasking environment under wide area operation, vendor development
have been taken-up on priority to meet project requirements both, in
execution and supply of 765/400kV equipment.

With zero product inspection as the ultimate goal, your Company has
taken up process audits at a number of manufacturing units spread all
over the country & also at overseas, at their works. Appropriate
corrective actions are also being taken up based on Quality Audit
feedback. Further, for asserting quality during transportation,
storage, erection and commissioning activities during implementation of
projects, Quality Audit on implementation of Field Quality Plans was
also carried out.

TECHNOLOGY DEVELOPMENT

Your Company gives priority to research and development activities with
potential for social, environmental & national benefits by
incorporating advance technology solutions to gear up for future
challenge.

The major areas of concern in development of transmission network in
the Country are conserving the precious Right of Way (RoW), minimizing
impact on natural resources, coordinated development of cost effective
transmission corridor and flexibility in upgradation of transfer
capacity of lines. In order to address these issues, your Company is
deploying technologies such as Multi Circuits, Compact & Tall Towers,
High Surge Impedance Loading Lines, Fixed & Thyristor controlled Series
Compensation, High Temperature Low Sag (HTLS) Conductors, etc.

Experienced with construction of 765kV Extra-High-Voltage AC (EHVAC) &
±500kV HVDC transmission system, Your Company is now implementing next
higher transmission voltages of ±800kV HVDC &working on 1200 kV
Ultra-High-Voltage AC (UHVAC) system to achieve efficient utilization
of RoW and increased power transfer capability for transfer of bulk
power over long distances.

800kV Multi-Terminal HVDC System

Implementation of ±800kV, 6,000 MW multi-terminal HVDC system of
around 2,000 km from North Eastern Region (NER) (Biswanath Chariali in
Assam and Alipurduar of West Bengal) to Northern Region (NR) (Agra in
Uttar Pradesh) is progressing well and commissioning shall be in
2015-16. Upon completion, it shall be one of the largest multi-terminal
HVDC systems in the world at this voltage level. HVDC system at 800kV
level is particularly used for bulk power transmission over long
distance with reduced RoW and losses.

1200kV UHVAC Transmission System

The 1200kV UHVAC technology, the highest voltage level in the world, is
being developed indigenously by your Company in collaboration with 35
Indian manufacturers. This is one ofthe unique R&D projects in
Public-Private Partnership model. In this, a 1200kV National Test
Station is being established by the Company to facilitate indigenous
development of UHVAC technology. The 1200kV Single Circuit (S/c) and
Double Circuit (D/c) test lines were successfully test charged along
with one 1200kV Bay at 1200kV UHVAC National Test Station at Bina,
Madhya Pradesh and field tests are currently undergoing. Hon''ble Union
Minister of State (l/C) for Power has dedicated the 1200kV Ultra High
Voltage (UHV) AC National Test Station at Bina, Madhya Pradesh to the
Nation in December, 2012.

Your Company continues to take pioneering steps in bringing Smart Grid
technology in all facets of power supply value chain in the country.
First Smart Grid Control Center in the Country has been established at
Puducherry by your Company through open collaboration with more than 70
organizations & academic institutions. Under this, important Smart Grid
attribute i.e. Advanced Metering Infrastructure (AMI) has been
implemented and other functionalities like Outage Management System,
Demand Response, Microgrid, etc. are being taken up in a progressive
manner. This Smart Grid pilot project would be very helpful to
demonstrate technology efficacy, evolution of commercial mechanism and
suitable regulation, formulation of interoperability framework,
indigenization of technology and renewable integration, etc. which can
be scalable and replicable at other places in the Country for overall
benefits to both consumers and utilities.

In addition, efficient street light management system has been
implemented at Puducherry which has resulted in reduction of energy
consumption for street lighting by about 15%. Further, development of
Smart Home Energy Management System is being carried out in association
with IIT, Kharagpur to facilitate consumers in energy management
process through remote operation. Towards green energy initiatives,
installation of 50kWp roof-top solar PV plant at NTAMC building,
Manesar is under progress.

In addition to preparing Project Report for Smart Grid implementation
by various distribution utilities/cities, your Company has prepared the
feasibility report for upcoming green field project at Dholera SIR,
coming under Delhi- Mumbai Industrial Corridor (DMIC).

Your Company has taken leadership initiative for implementation of
Smart Grid Technology in transmission also. Towards this, the Company
has executed Wide Area Measurement System (WAMS) pilot project in four
(4) regions and is under progress in the Eastern Region. Under this
initiative, presently about 40 nos. Phasor Measurement Units (PMUs) are
in operation, facilitating dynamic real time measurements and better
visualization of power system which are useful in monitoring safety &
security of the grid along with enhanced situational awareness and
taking control/corrective actions.

For full scale implementation of WAMS technology on pan India basis,
your Company has proposed "Unified Real Time Dynamic State Measurement
System (URTDSM)" scheme integrating State and Central grids, i.e. PMU
placement at all HVDC, 400kV and above substations / generating
stations including 220 kV level and PDC (Phasor Data Concentrator) at
strategic locations. The Scheme shall enhance the efficiency in overall
grid management in electricity open market regime. Total estimated cost
of the URTDSM project is aboutRs. 655 Crore.

GREEN ENERGY CORRIDORS - GRID INTEGRATION OF RENEWABLE ENERGY

Integration of Renewable Energy Resources with grid is the top priority
worldwide for energy security and also for carbon emission reduction.
Government of India is taking various initiatives in the area of
renewable energy capacity addition and about 42 GW of generation is
envisaged in XII plan. Your Company has taken a lead initiative and
developed a comprehensive master plan, Green Energy Corridors, which
has been released by Ministry of Power and Ministry of New & Renewable
Energy (MNRE) for integration of renewables coming up country- wide in
XII plan.

This covers identification of transmission requirement at inter-State
and intra-State level for grid integration of envisaged renewable
capacity addition. Further, to address the intermittency and
variability characteristics of renewable generation, other control
infrastructure like forecasting of renewable generation and demand,
Real time measurement/monitoring through Synchrophasor technology,
flexible generation, ancillary reserves, Demand-side & demand response
management and energy storage, establishment of Renewable Energy
Management Centers (REMC) etc. is also identified.

A Joint Declaration of intent is also signed between Govt, of India &
Govt, of Germany for cooperation in the field of integration of
renewable energy sources in the form of providing financial assistance
through soft loan of about 1 billion euro by Germany to develop
prioritized Inter- State & Intra-State transmission systems i.e. Green
Energy Corridors as well as sharing oftechnical expertise in the above
field.

PERFORMANCE IN TELECOM

Your Company is leveraging its countrywide transmission infrastructure
diversified into Telecom business under the brand name ''POWERTEL'' to
expand its revenue base. Your Company has an all India Broad Band
Telecom Network of about 29,300 km with connectivity provided to all
metros, major cities, towns, State capitals including remote areas of
North-Eastern Region, Jammu & Kashmir etc. covering about 290 Points of
Presence (PoPs) across the country from where services are being
rendered. Your Company is the only utility in the Country providing
Telecom Services on overhead optic fibre network using Optical Ground
Wire (OPGW) on power transmission lines and possess Infrastructure
Provider Category-1 (IP-1), Internet Service Provider ''A'' (ISP ''A'') and
National Long Distance Service License (NLD) to provide a variety of
Telecom services.

Availability of Telecom Backbone system was maintained at 99.92% during
FY 2012-13. The income from Telecom in FY 2012-13 has increased to
about Rs.231 Crore from Rs.201Crore in FY 2011-12. The revenue from our
telecommunication business is mainly on account of leasing of bandwidth
on our fibre-optic links to various customer segments viz, Telecom
Service Providers, Government Departments, Multi National Companies
(MNCs), media etc.

National Knowledge Network (NKN)

Your Company is one of the implementing agencies of the prestigious
National Knowledge Network (NKN) project devised by Govt, of India
which plans to connect all knowledge centres across the Country such as
Indian Institutes of Technology (IITs), Indian Institute of Science
(lISc) etc., on high speed connectivity. Total expected revenue to the
Company under this project over a period of 10 years is aboutRs. 900
Crore. Total advance amount received from National Informatics Centre
(NIC) against NKN order is Rs. 640.85 Crore till March 31, 2013.
National Optical Fiber Network (NOFN)

Your Company is a member of Advisory Body and Core Committee of the
ambitious National Optical Fiber Network Project through which
Government of India plans to connect 2,50,000 Gram Panchayats (GPs) on
Optical Fiber network utilizing existing facilities of Bharat Sanchar
Nigam Limited (BSNL), POWERGRID and RailTel Corporation of India
Limited at an estimated cost of Rs. 20,000 Crore with completion period
of 24 months. As a part of this, your Company has completed a pilot
project at Parawada Block, Viskhapatnam District (Andhra Pradesh) in
October 15, 2012 utilizing existing fibers of BSNL & POWERGRID and
laying incremental fiber wherever required.

Under this, your Company has received an allotment letter from Bharat
Broadband Network Ltd (BBNL) for development & maintenance of NOFN
network in four States viz. Andhra Pradesh, Himachal Pradesh, Jharkhand
& Odisha covering about 36,000 GPs. The work is to be carried out in
about 89 districts covering 1,769 blocks across these fourStates. The
estimate cost of the project for these four States would be about Rs.
2,700 Crore. As a part of this, your Company has signed a MoU with BBNL
for developing NOFN network in 4 States on Build, Operate and Maintain
basis, on December 04, 2012. Presently, survey activities are under
progress.

BUSINESS DEVELOPMENT & CONSULTANCY

Your Company continues to showcase its leadership in its core areas
such as Power Transmission, Sub-transmission, Distribution and Telecom
utilising the techno-commercial proficiency to offer consultancy
services worldwide.

On the domestic front, during FY 2012-13, the Company has bagged 26 new
assignments aggregating to a project cost ofRs.715 Crore, with
continued & unbounded trust in your Company by Public & Private
utilities alike. To enhance customers'' base, business promotion
activities have been undertaken by your Company with various Central
Public Sector Undertakings like SAIL, RINL, DMIC, DFCC, Railways, etc.
& succeeded in bagging contract with SAIL for providing technical
services to four plants of SAIL. In addition, being the front runner in
Smart Grid implementation in the Country, our initiatives to provide
technical services for Smart Grid / Smart City applications are
expected to bear fruit and bring number of consultancy assignments in
near future.

Further, your Company has undertaken an international Joint Venture
(JV) with Nepal. As a result of this, Cross border Power Transmission
Company Ltd., (CPTC) became operational this year, which has 10% equity
participation from Nepal Electricity Authority. This Company shall
implement Indian portion of Indo-Nepal link (Muzaffapur, India to
Dhalkebar, Nepal). For Nepalese portion of this international link,
your Company shall be participating 26% equity in another international
JV Company i.e., Power Transmission Company Nepal Ltd., (PTCN).

In international arena, during the year, your Company had bagged 9
(nine) new assignments having project cost of Rs. 332 Crore. At the end
of the FY 2012-13,17 assignments were under execution with footprint in
11 countries viz. Nepal, Bhutan, Bangladesh, Afghanistan, Sri Lanka,
Myanmar, UAE, Nigeria, Ethiopia, Kenya &Tajikistan.

During the year, your Company has earned revenue ofRs. 315 Crore from
consultancy business including consultancy income from sale of
products, surpassing previous year''s revenue ofRs. 290 Crore.

SAARC Grid

Your Company continues to play an active role in preparing a roadmap
for developing South Asian Association for Regional Cooperation (SAARC)
market for electricity to develop a cross country power-grid,
harnessing each other''s capacities and resources to address the growing
energy need in the region. Presently, various interconnections exist
between India & Nepal and India & Bhutan and these are being
strengthened for mutual exchange of power. For evacuation of power from
various upcoming Hydro Electric Power (HEPs) in Bhutan, Punatsangchu-I
HEP (in Bhutan) - Alipurduar (in India) 400 kV Double Circuit (D/c)
line between Bhutan & India is under implementation and expected to be
completed by 2015. Further, an asynchronous interconnection between
India & Bangladesh through 500 MW High Voltage Direct Current (HVDC)
back-to-back terminal along with Bheramara (Bangladesh) - Baharampur
(India) 400kV D/c line is under implementation and expected to be
completed by 2013. For transfer of bulk power, interconnection between
India and Nepal through 400 kV Dhalkebar (in Nepal) - Muzaffarpur (in
India) D/C transmission line is under implementation. For
interconnection between India and Sri Lanka, feasibility study for a
±400kV, 500/1000MW under-sea HVDC bipole line is under finalization.
Further, discussions at Government level are being held for
interconnection between India and Pakistan through Amritsar (India) -
Lahore (Pakistan) line.

EXPLORING NEW HORIZONS

Your Company continues to pursue its exploration towards backward
integration and is forming Joint Venture Companies with the prime
producers of raw material for manufacturing of major transmission
equipment. In this direction, your Company has signed MoU with SAIL for
manufacturing of transmission line towers and its parts including
Research & Development facilities in addition to the MoUs signed
earlier with National Aluminium Company Limited (for Conductors) and
Rashtriya Ispat Nigam Limited (for transmission line towers). These
facilities are envisaged to cater to domestic/ international market.

Further, with a view to spur the development of sub-transmission system
in the Country by providing support to States, your Company has formed
Joint Venture Companies (JVCs) namely Bihar Grid Company Limited with
Bihar State Power (Holding) Company Limited and Kalinga Bidyut Prasaran
Nigam Private Limited with Odisha Power Transmission Corporation
Limited, on 50:50 equity participation basis for development of
Intra-State Transmission System in the State of Bihar & Odisha,
respectively. Various regulatory / statutory approvals in respect of
the above are under process. Further, discussions are under process for
forming a similar Joint Venture Company with other State(s).

CONTRIBUTION IN DISTRIBUTION REFORMS

Govt, of India''s "Rajiv Gandhi Grameen Vidyutikaran Yojana(RGGVY)"
scheme for Rural Electricity Infrastructure and Household
Electrification was launched for the attainment of the National Common
Minimum Programme of providing access to electricity to all Rural
Household. Your Company has taken a lead role in implementation of
RGGVY works and has been assigned one-third of the total works for
execution of rural electrification covered in 68 districts of nine
States in the Country of a base cost of about Rs. 7,230 Crore. Most of
the schemes have already been completed. During FY 2012-13,
infrastructure was created for electrification in 3,852 villages out of
which 146 were un-electrified villages and 8,053 villages were
energised out of which 1,115 villages were in un-electrified category.
Service connections were provided to about 1.82 Lakh BPL households.
Cumulatively, till March, 2013, infrastructure has been created for
electrification of 68,654 villages out of which 32,463 were
un-electrified villages and service connection to about 35.37Lakh BPL
households were provided.

XII PLAN INVESTMENT PROGRAMME

In XII Plan, your Company had planned to make an investment of Rs.
1,00,000 Crore matching with the envisaged generation capacity
addition. This investment is mainly for implementation of various
inter-state transmission systems including High Capacity Power
Transmission Corridors (HCPTCs), inter-regional links for grid
strengthening, system strengthening schemes, etc. Out of the planned
Rs.1,00,000 Crore, your Company has already made a Capital expenditure
of Rs.20,037 Crore in the first year of the Plan i.e. FY 2012-13.
During the XII plan, transmission network addition of about 40,000 ckm
of transmission lines and about 1,00,000 MVA of transformation capacity
has been envisaged in which your Company has already commissioned 7,156
Ckm of EHV transmission lines and transformation capacity of more than
40,230 MVA in FY 2012-13.

To meet the CAPEX of Rs.1,00,000 crore, your Company has to raise a
Debt of about Rs.70,000 Crore of which about Rs.38,800 crore, i.e. 54%,
has already been tied up through funding from various mechanisms.
Further, your Company has excellent credit rating by both domestic and
international credit agencies and thereby do not foresee any difficulty
for resource mobilisation. The Loan requirements are planned to meet
through Loans from multilateral institutions like The World Bank, Asian
Development Bank, Supplier Credit, External Commercial Borrowings
through bonds / notes besides loans from domestic market through
private placement of bonds.

ERP & IT

Your Company is establishing the Enterprise Resource Planning (ERP)
system in its organization to manage the massive information flows in
the system. The main package of ERP Project has been awarded to M/s
Tata Consultancy Services (TCS) which includes development of Data
Centre, Disaster Recovery Centre and augmentation of communication
network. The pilot project ofthe same is expected to be operational
during FY 2013-14. The pilot project will cover the Company''s Corporate
Centre in Gurgaon and one of its regional headquarters.

During the year, your Company had provided Laptops and data-cards to
the employees for efficient accomplishment of their functions with
swifter & easier storage, usage, transfer and retrieval of data.
Further, utilising the skills & in-house expertise, the Company has
systematically developed various software applications to smoothening
its functional areas. The Company has also renewed its website in a
contemporary fashion to make it more user friendly. Being located in
pan India basis, advanced communication system has became essential and
to actualize that the Company had installed High Definition
Multi-conference Unit (MCU) at Corporate Office, Gurgaon including
Video Wall System. Your Company has taken the necessary steps for
is0:27001 certification and for implementation of the necessitated
Information Security Management System (ISMS) across the organization
tendering is in process.

SUSTAINABLE DEVELOPMENT

Major concern that globe is facing now is the environmental degradation
and increasing threat of climate change. The transmission projects
being implemented by your Company are environmentally clean and involve
neither disposal of solid waste, effluents or hazardous substances in
land, air or water nor large scale excavation which may result in soil
erosion.

However, your Company has proactively formulated and followed the
Environmental and Social Policy & Procedures (ESPP) for the
conservation of forests, flora & fauna, resettlement & rehabilitation.
Following the principle of Avoidance, Minimization and Mitigation, your
Company ensured to evade Great Indian Bustard Sanctuary in Madhya
Pradesh and Achanakmar-Amarkantak Biosphere Reserve in Chhaffisgarh
during construction of765 kV Indore-Dahod and 765 kV
Dharamjaigarh-Jabalpur lines respectively.

Your Company was the first Company in power sector to come out with the
''Sustainability Report'' in March, 2010 and second such report has been
published in March, 2013, providing all stakeholders a clear picture of
our contribution to sustainable development through its activities. The
report is based on GRI-G3 guidelines. International Standards like
Accountability, UK Standard "AA1000:2008 APS and AA1000:2011 SES" have
been followed to make the process more inclusive.

The Company has taken various initiatives towards sustainable
development and in the direction of reducing its carbon footprint.
Towards this, the Company has adopted Rain Water Harvesting facility in
its establishments. Every substation being constructed now is provided
with rain water harvesting systems. In addition, energy efficient Light
Emiffing Diode (LED) bulbs and Solar lights are being provided in new
substations to reduce in-house consumption of energy. A waste paper
recycling plant has been installed at Gurgaon substation and with the
produced recycled papers letter heads and business cards are being
printed. New buildings are being constructed as per Green Building
norms. Your Company with an initiation to reduce the energy consumption
has undertaken Energy audit at 12 of its sub-stations during FY 2012-13
and based on its reports necessary actions undertaken for improvement.

Your Company is focusing on more number of high capacity transmission
systems which will help in utilizing the right-of-way in an optimal
manner and minimizing the loss of forest, flora & fauna and natural
resource like land, etc.

CORPORATE SOCIAL RESPONSIBILITY

Your Company, emphasizing on socio-economic and integral development of
areas/ communities primarily in and around its areas of operations,
carries out various community development activities such as Skill
Development & Capacity Building, livelihood generation, healthcare,
education, plantation, sanitation, drinking water besides
infrastructure developments like classrooms, roads, community centres
etc.

During the FY 2012-13, the Company made an expenditure of Rs. 21.75
Crore [0.67% of Profit After Tax (PAT) of the preceding year] for
carrying out about 440 CSR projects including 19 in education sector,
152 in the area of infrastructure, 140 in healthcare and 131 for
livelihood. During this period, about 1.09 lakh tree saplings were also
planted by your Company in different parts of the Country.

Towards various skill development programmes, the Company has given
more emphasis on training youths in the area of "Transmission Line
Tower erection" which is being conducted in association with leading
EPC Contractors. During the year, 258 candidates were trained under
this program and most of them were gainfully employed in the
transmission industry. Other skill development / livelihood training
programs imparted to unemployed youth are in the field of tailoring,
cuffing/ stitching, embroidery, automobile repairing, handloom weaving,
food & fruit processing, repairing of household appliances, etc. to
secure employment or be self-employed.

An extensive programme on Maternal & Child Healthcare was organised in
15 villages of Gurgaon, Mewat & Jhajjar districts of Haryana. A total
of 72 health camps in different villages of these 3 districts were
conducted under this program during FY 2012-13.

Further, your Company is in the process of establishing 4 nos.
Industrial Training Institutes (ITIs) with 2 nos. each in the States of
J&K and Odisha. Consequently upon establishment of these ITIs, the same
shall be handed over to the concerned State Government for operation
and maintenance.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital Our
employees are the most important asset and their incessant growth is
the most treasured investment. Your Company encourages and initiates
various programmes for bolstering and enriching the continuous
development of the knowledge horizon ofthe employees.

In order to align the human resource development strategy with the
business objectives, the Company conducted Organization Need Assessment
(ONA) capturing the organizational requirement for competency
enhancement of employees and then conducted online Training Need
Assessment (TNA) for individual employees. Through the online TNA
process, your Company has been able to link the development plans of
employees with Performance Management System which helps the
organization to keep updating the competencies of employees to meet
current and future requirement.

Apart from focussed functional and behavioural development of its
employees, the Company conducted series of certified Learning &
Development Programs on Regulatory Framework in Power Sector and
certified workshop on Earned Value Management System for top and senior
level executives as part of their strategic development. During the
year, an average 5.95 training mandays per employee has been achieved
to equip employees for leadership development, technological
enhancement and future challenges.

During FY 2012-13, POWERGRID has inducted 117 personnel at various
levels viz., executives, supervisors, workmen through open
advertisement on all India basis and campus selection from reputed
engineering and management institutes for executives, and for
non-executives through employment exchanges and local advertisement at
regional level.

New initiative of Mentorship Development has been taken under which
young executives are guided by the mentors who nurture, guide and
direct them to integrate with the system and values of the organization
and counsel them on regular basis. Seffing the tone for new business
areas in Energy Auditing, the Company has trained group of executives
for undergoing through the process of National Certification
Examination for Energy Auditors and subsequent accreditation by Bureau
of Energy Efficiency (BEE).

To create a vibrant workforce rising to opportunities and challenges in
Company''s future business context, POWERGRID Climate Survey 2012- 2013
was conducted amongst executive and supervisor level employees with a
view to capture the key factors of employee satisfaction, employee
engagement and the existing organisational cultural capabilities and
the future cultural capabilities.

Your Company has started running its own Hot Line Training Centre at
Hyderabad duly accredited by Central Electricity Authority (CEA). This
centre is the only accredited Hotline Training Centre in India and has
been set up to provide in-depth approach and training for technical and
practical know-how of live line maintenance.

During the FY 2012-13, your Company has signed Memorandum of
Understanding (MoUs) with IIM, Lucknow, IIM, Bangalore, CPRI,
Bangalore, IIT, Chennai and IIFT, New Delhi which will enable the
organization to leverage each other''s capability and resources in areas
of pedagogy, training, research and innovation in systems, process,
etc.

Employee Welfare

Your Company undertakes requisite changes in various policies from time
to time in line with the needs and welfare of employees. The Company
had empanelled various hospitals nearby to its establishments including
Corporate Centre for the healthcare of employees and their dependents.

Your Company successfully continues to address the issues related to
workmen through the National and Regional Bipartite Committee
(PNBC/PRBC), a joint consultative forum comprising management and
workmen representatives. During the year, the Industrial Relations
scenario in the Corporation has been cordial and no man days were lost.
An effective work culture has been established in the organization
through empowerment, transparency, decentralization, and practice of
participative management.

Quality food is served to the employees in the ISO 22000:2005 conferred
Cafeteria in the Corporate Office and Food Lounge of Multi Purpose hall
of your Company. Healthy community living is spread through
periodically conducted cultural programmes for celebrating various
occasions like Diwali get-together, Holi Milan, New Year, Raising Day,
etc. in all establishments of the Company.

The Company also conducted various sports competitions, for boosting
the interest of employees in sports and games, at intra and inter-
regional level for Kabaddi, Cricket, Volleyball, Badminton etc. Your
Company also participates regularly in Inter-PSU Sports meet also. Your
Company players in Cricket, Table Tennis, and Carom have stood
meritorious and bagged awards in the Inter-PSU tournaments.

Citizen''s Charter

The Company formulated its Citizen''s Charter providing a visible front
of its mission & objectives, commitments, terms of service and its
obligation to various stakeholders. In the Citizen''s Charter
information is available about Company''s schemes, policies, project
plans ofthe Corporation and issues ofgeneral interest to stakeholders.

Implementation of Official Language

Your Company, being sensitive towards our heritage, social and cultural
concerns, continues to prove its commitment for implementation of
Rajbhasha Policy of Govt, of India.

Your Company is enforcing and puffing all efforts for usage of Hindi in
all aspects of management in all levels ofthe corporation. Further, the
Company is organizing various events such as workshops to impart
training in translation, enhancing working knowledge through organizing
computer trainings and Hindi classes, etc. for increased use of
Official language. Events like Akhil Bhartiya Rajbhasha Sammelan, Kavi
Sammelan (poetry sessions), Kavita Pratiyogita, Drama, Publication of
Hindi Magazines/papers, competitions and meetings, etc. are regularly
organized. To provide further inspiration, employees are nominated for
external Hindi training programmes which are encouraging them to work
in Hindi.

Various forums such as Parliamentary Committees on Official Language,
Advisory Committee on Official Language and Town Official Language
Implementation Committee (TOLIC) had applauded the efforts taken by
your Company for implementing Rajbhasha besides receiving many
accolades.

Corporate Image through Communication Management

In the current global competitive scenario, it is crucial that
Companies carve out a unique niche for itself in terms of building
strong relationship with its stakeholders and establishing brand
identity for themselves through various innovative communications
management initiatives.

In order to facilitate interaction with the stakeholders in respect of
achievements, growth, recent developments on operational and financial
front, regular press communique have been issued by your Company and
face to face interaction of the management arranged with the analysts
and stakeholders at the Quarterly Analyst Meet and Press Meet. This has
enhanced brand exposure with existing and potential clients, investors
and other stakeholders.

Your Company through its efficient communication management handled the
most challenging communication crisis by disseminating prompt
information amongst the press and journalists regarding restoration of
the National Grid in July/ August, 2012. The management was regularly
updating the press and the media by releasing hourly updation reports
and interviews thereby maintaining a transparent communication with the
public.

Your Company successfully participated in the India International Trade
Fair (IITF) 2012 exhibition by creating a theme stall based on Smart
Grid Technology and 1200 kV HVDC transmission line, focusing on its
ongoing activities, core competencies and current assignments. The
Company also participated in many business oriented exhibitions,
technical, social seminars and workshops to reach out to its principal
clients and the public.

With a view to integrate the employees'' outlook towards the Company''s
mission, goals and strategies numerous internal communications tools
are deployed such as monthly newsletters in digital form, wall
magazines, lounge for regular event updates to apprise the
developments, achievements & viewpoints of organisation. Besides this,
we also provide a stage to our employees for direct interaction with
management by organizing "Open House" session time to time where CMD
and Directors interact with all the employees either directly or
through video conferencing. These internal communications has been
instrumental in boosting employee morale, enthusiasm and in turn giving
a fillip to revenue per employee.

EXHIBITION AND CONFERENCE ON NEWTECHNOLOGIES - GRIDTECH 2013

Your Company with the support of Ministry of Power and in association
with CBIP and IEEMA has organised its 4th International Exhibition and
Conference GRIDTECH 2013 on new technologies in transmission,
distribution, smart grid/city, load dispatch & communication. Being an
excellent global networking opportunity for exhibitors, visitors and
delegates, GRIDTECH 2013 provided an opportunity for all Companies to
showcase their Transmission, Distribution, Smart Grid, Load Dispatch
and Communication expertise and know-how and to identify business
opportunities in the electricity market in India and abroad.
Recognising the importance in development of Smart Grid/City for
sustainable development, special considerations and showcasing were
done for exhibiting real life working of Smart Grid/City covering
various functionalities by the exhibitors including the demonstration
of the functioning of Smart Home Energy Management System.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FUNCTION

Your Company focuses more on Preventive and Pro-active Vigilance, apart
from Detective, Predictive and Punitive Vigilance. Aiming at better
transparency in working of the Organisation and to inculcate a sense of
Ethics, Integrity and sound Corporate Governance several steps are
being taken for improving the system and vigilance administration
through various technologies such as Online Complaint Handling System,
Vigilance Information Network System (VINS), Online Property Returns,
e-bidding, e-payments, e-auction, e-procurement, e-billing, etc. in the
Organisation as a whole. Various workshops on Preventive Vigilance,
Ethics and the RTI Act are also conducted both at the Corporate Centre
as well as in the Regions.

Your Company, as a part of Preventive Vigilance, inspections in the
form of surprise and process online were conducted, apart from CTE type
inspections. Based on the inspections conducted, adequate cost
compensation was effected on points not conforming to technical
specifications or conditions of Contract, etc. On the basis of surprise
inspections conducted, some cases were also registered for
investigation and necessary disciplinary proceedings were initiated in
some cases. A number of complaints were also received both internally
as well as from outside agencies. The Company has adopted zero
tolerance towards corruption. The complaints received are therefore,
taken up for verification, earnestly. On the basis of investigations
conducted into these complaints, disciplinary action, wherever
appropriate, was also initiated against some employees. The Vigilance
Department continues its drive to spread awareness amongst employees by
sending bulk SMS and e-mails regarding the provisions of the Conduct,
Discipline and Appeal Rules. Continuous improvement in systems and
procedures has always remained one of the hallmarks of your Company.
The Company have, like in previous years, continued its focus on
spheres of functioning, like, communication of assessment to the
concerned bidders, incorporation of provision relating to conflict of
interest, restriction relating to purchase of mementoes to visiting
dignitaries, installation of surveillance cameras to increase security,
storage of materials at construction sites, etc. Vendors'' meet were
also organized during the year in various Regions to bolster more
interaction with the stakeholders.

During Vigilance Awareness Week, your Company organized a number of
programmes both at Corporate Centre and regions like essay, debate,
quiz, slogan and painting competitions both for employees as well as
for their family members. Panel discussions and lectures by eminent
personalities and academicians were also organized. The Vigilance
Commissioners, Shri R. Srikumar and Shri J.M. Garg, addressed the
employees at Corporate Centre and at the Regions (through Video
Conferencing) during this week. The in-house journal ofthe Vigilance
Department, ''Candour'' was also inaugurated during this period and
distributed widely amongst the employees.

ACCOLADES & AWARDS

Govt, of India and other prestigious organisations & institutes has
bestowed your Company with various awards/ accolades in various
categories.

Your Company has been selected for ''MoU excellence award'' for FY
2010-11 by Department of Public Enterprises (DPE), Ministry of Heavy
Industries & Public Enterprises for being the top performer in the
Energy Syndicate.

Your Company had been conferred with the "3rd Rajeev Gandhi Excellence
Award 2011" under the ''Best Power Company of the Year'' Category by an
NGO "Pehchan", to commemorate Late Prime Minister Shri Rajiv Gandhi''s
birthday, in a function held on August 20, 2012 at New Delhi.

Your Company has also been conferred with the 4th DSIJ PSU Awards 2012
for "Fastest Growing Navratna in non-manufacturing category" by Dalai
Street Investment Journal in a function held in New Delhi on March 23,
2013.

Further, your Company''s team had won the National Championship of
National Competition for Business Management Simulations -2012 and
represented India in Asian Championship.

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the issues in the Directors'' Reports, some issues have
been brought out in Report on Management Discussion and Analysis placed
at Annexure-I.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 ofthe
Listing Agreement with the Stock Exchanges is given in Annexure-ll and
forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

The particulars of employees of the Corporation who were in receipt of
remuneration in excess of the limit prescribed under Section 217 (2A)
of the Companies Act, 1956 is given in Annexure-lll to this Report.

As per requirements of disclosures under Section 217(1) (e) of
Companies Act,1956 read with Rule 2 of the Companies (Disclosures of
Particulars in the Report of Board of Directors) Rules, 1988
information relating to conversation of energy, technology absorption
and foreign exchange earnings and outgo is given in Annexure-IV to this
Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has achieved ''NIL'' comments on the accounts for the year ended
March 31, 2013 by the Comptroller and Auditor General of India under
Section 619(4) ofthe Companies Act, 1956. Copy is attached in
Annexure-V to this Report.

CORPORATE GOVERNANCE

A Report on the Corporate Governance (Annexure-VI), forming part of
this Report, together with the Certificate thereon is given in
Annexure-VII to this report.

Your Company has got its Secretarial Compliance Audit conducted for the
financial year ended March 31, 2013 from M/s Sanjay Grover &
Associates, Practising Company Secretary. Their Report forms part of
this Annual Report (Annexure-VIII).

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller
& Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee &
Co., and M/s Sagar & Associates were appointed as Joint Statutory
Auditors for the financial year 2012-13.

COST AUDITORS OF THE COMPANY

Your Company had appointed the Cost Auditors Shri Jugal Kishore Puri
and M/s. K. G. Goyal and Associates for the Financial Year 2012-13.
Further, M/s. K. G. Goyal and Associates and M/s. S. C. Mohanty &
Associates have been appointed as Cost Auditors for the Financial Year
2013-14 under Section 233B of the Companies Act, 1956.

The due date for filing Cost Audit Reports for the financial year
2012-13 with the Cost Audit Branch, Ministry of Company Affairs is
September 27, 2013 and the same will be filed with the Cost Audit
Branch within the stipulated time.

POWERGRID''S BOARD

During the year under report, some changes took place in the
Directorate. Shri Ravi P. Singh assumed the charge of Director
(Personnel) with effect from (w.e.f) April 1, 2012 and Shri R. P.
Sasmal, took over the charge of Director (Operations) with effect from
August 1, 2012. Five non-official part time directors viz. Shri R. K.
Gupta, Dr. K. Ramalingam, Shri R. Krishnamoorthy, Shri Ajay Kumar
Mittal and Shri Mahesh Shah were appointed with effect from January 16,
2013.

Further, Shri Rakesh Jain, JS&FA, MoP, ceased to be Director on the
Board of the Company w.e.f. July 08, 2013 (Afternoon). The Board wishes
to place on record its deep appreciation and gratitude for the
invaluable contribution and unstinted support to the Company extended
by Shri Rakesh Jain during his tenure as Director ofthe Company.

In accordance with the provisions of Section 255 and 256 of the
Companies Act, 1956 read with Article 31(iii) of the Articles of
Association of the Company, Smt. Rita Sinha, Shri Santosh Saraf,
Independent Directors shall retire by rotation at the Annual General
Meeting of your Company and being eligible, offer themselves for
re-appointment.

ACKNOWLEDGEMENTS

The Board of Directors, with deep sense of appreciation, acknowledges
the guidance and co-operation received from Govt, of India,
particularly Ministry of Power, Ministry of Finance, Ministry of Home
Affairs, Ministry of External Affairs, Ministry ofStatisticsand
Programme Implementation, Ministry of Environment & Forests, Central
Electricity Regulatory Commission, Appellate Tribunal for Electricity,
Central Electricity Authority, Planning Commission, Department of
Public Enterprises, Regional Power Committees, and other concerned
Govt, departments/ agencies at the Central and State level as well as
from Securities and Exchange Board of India, National Stock Exchange of
India Ltd., and BSE Ltd., Mumbai without whose active support, the
achievements by the Corporation during the year under review would not
have been possible.

Board''s special appreciation and thanks are due to our valued
customers, various State power utilities and other clients, who have
awarded various consultancy works and reposed faith in Company''s
capability to handle them. The Board also appreciates the contribution
of contractors, vendors and consultants for successful implementation
of various projects by the Company.

The Directors take this opportunity to thank the Principal Director of
Commercial Audit and Ex-Officio Member Audit Board-Ill for the
co-operation during the year. Directors also acknowledge the valuable
suggestions and guidance received from the statutory auditors during
the audit of accounts of the Company for the year under review. The
Board also conveys its sincere thanks to various national/
international financial institutions/ banks/ credit rating agencies for
their timely assistance, continued trust and confidence reposed by
themon POWERGRID.

We have achieved a great deal this year and none of it would have been
possible without the skills and dedication of each member of POWERGRID
family at all levels. I would like to thank the Executive team for its
strong leadership, the various employee unions to ensure that the
Company continues to achieve greater heights year after year and all
our employees for their commitment and enthusiasm to achieve ouraim to
be the world''s premier transmission network utility.

For and on behalf of the Board of Directors

Place: New Delhi (R. N. Nayak)

Date: 06.08.2013 Chairman & Managing Director

Mar 31, 2003

I am privileged to present on behalf of the Board of Directors, the
14th Annual Report of Power Grid Corporation of India Limited
(POWERGRID), together with the Audited Statements of Accounts for the
financial year 2002-03. It has been another eventful year for your
company, which can be appreciated from the score sheet presented below.

Project Implementation

POWERGRID continued to implement its projects with economy and within
stipulated time frame to derive maximum economic benefits. Its advanced
and cost effective Integrated Project Management and Control System
(IPMCS) for total project review and perpetual monitoring, has
contributed significantly. I am happy to report that during the
financial year 2002-2003, POWERGRID commissioned projects worth Rs.
5,300 crore, highest so far in any one year in the POWERGRIDs history.
These projects were completed at a cost lesser by Rs. 850 crore than
the Govt. of India approved cost. Major transmission projects that were
commissioned are, 500 MW Sasaram HVDC back-to-back, +/- 500 kV/2000 MW
Talcher-Kolar HVDC Bi-pole, 400 kV D/C Kolhapur-Mapusa, 400 kV S/C
Jamshedpur-Rourkela, 400 kV D/C Raipur-Rourkela, and 400 kV D/C
Vijayawada-Nellore-Chennai transmission system. The company established
eleven (11) new 400/220 kV EHV AC sub-stations and HVDC stations in the
year, besides extension of many existing sub-stations.

Operations and Maintenance

During the year, about 6,000 Ckt. Kms. of transmission lines were added
enhancing its network size to 46,245 Ckt. Kms., consisting of 563 Ckt.
Kms. of 800 kV, 4,368 Ckt. Kms. of HVDC, 31,952 Ckt. Kms. of 400 kV,
7,277 Ckt. Kms. of 220 kV, 2,048 Ckt. Kms. of 132 kV & 37 Ckt. Kms. of
66 kV transmission lines. This extensive transmission network along
with 79 substations with transformation capacity of 44,736 MVA was
maintained at an average systems availability of 99.39 % exceeding the
target level of 98.25% set for the year.

Financial Management

The company registered a Turnover of Rs 2532.74 crore and earned a Net
profit (After tax) of Rs. 642.59 crore thereby recording a Net profit
margin of 25.37%. The companys Gross asset base and paid-up capital at
the end of the financial year 2002-03 stood at Rs. 18,943. crore and
Rs. 3,074 crore respectively as against Rs. 13,777 crore and Rs. 3,068
crore at the end of last financial year. The Debt to Equity ratio at
the end of the financial year was 61.39 with scope for further
leveraging of the capital.

Statutory Auditors, in their Audit Report have qualified the provision
of depreciation on fixed asset at the rates specified in the tariff
notification issued by CERC instead of rates notified Under the
Electricity (Supply) Act, 1948 resulting in understatement of
depreciation and overstatement of profit for the year by Rs. 461 crore.

The above Auditors comment is due to the reason that the rates of
depreciation notified the Govt. of India u/s 25A of the Electricity
(Supply) Act,1948 have not so far been amended to correspond

to the CERC rates. The charse of depreciation considered in the Profit
& Loss A/C is at the rates notified by CERC for recovery of
depreciation included in the transmission charges and maintaining the
earlier principle, there is no overstatement of profits.

The significant changes in the accounting policies are given below:

I. ULDC Assets have been commissioned during the financial year in
Northern and Southern Regions. POWERGRID has also constructed ULDC
assets for SEBs, Tariff of which is being recovered as Levelised
Tariff. These transactions are considered as finance lease in terms of
AS-19 issued by ICAI. The following new accounting policy in respect of
treatment of lease rentals from investment in State Sector ULDC assets
in the books of POWERGRID has been made:

a) State Sector ULDC assets leased to the SEBs are considered as
Finance Lease. Net investment in the leased assets is accounted as
lease receivables under Loans and Advances.

b) Finance income on leased assets is recognised based on a pattern
reflecting a constant periodic rate of return on the net investment.

c) Exchange Rate Variation (ERV) on foreign currency loans relating to
leased assets is adjusted to the amount of lease receivables and is
amortised over the remaining tenor of lease. ERV recovery (as per CERC
norms) from the constituents is recognized net of such amortised
amounts.

II. Surcharge which was hitherto being accounted for on receipt basis
is now accounted for on receipt/certainty of receipt. This change in
policy has resulted in increase in other income and profit by Rs.192.29
crore.

As per the terms of the tripartite agreement signed by State Govts. (on
behalf of SEBs), Ministry of Finance and RBI, all surcharge and
interest payable by the SEBs on the overdues of CPSUs shall be written
off to the extent of 60%. Out of Surcharge of Rs. 192.29 crore
accounted for during the year, Rs. 188.78 crore pertains to period
covered by tripartite agreement and is net of the waived amount of Rs.
221.85 crore. However, the waived amount was never accounted for as
income in any of the earlier years as per the accounting policy of the
Corporation.

Dividend

Interim dividend to the tune of Rs.50 crore has been paid in March,
2003 and the Directors have recommended a further dividend of Rs.50
crore for the financial year 2002- 03 in addition to the interim
dividend.

Transfer of Profit to Reserves

Appropriation of profit towards General Reserve amounting to Rs.500
crore and Rs.115.25 crore towards Redemption Reserve has been proposed.

Directors Responsibility Statement

- In the preparation of the Annual Accounts, the applicable accounting
standards have been followed.

- The Directors had selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the company at the end of the financial year and of the profit or loss
of the company for that period.

- The Directors had taken proper and sufficient care in accordance with
the provisions of the Act for safeguarding the assets of the company
and for preventing and detecting fraud and other irregularities,

- The Directors had prepared the annual accounts on a going concern
basis.

Capital Investment and Fund Mobilisation

The company undertook a capital investment of Rs. 2,561 crore during
the financial year 2002-03 and the required funds were tied up from
internal resources, bonds/term loan from the domestic sources, grant
from Government of India and ECB/Suppliers Credit. A suppliers Credit
from Skandinaviska Enskilda Banken, Sweden amounting to SEK 345 million
was tied up during the financial year for financing the 1x500 MW Back
to Back HVDC project at Vizag associated with East-South
Interconnector-lll project. Rs. 810 crore was mobilised at competitive
rates from the domestic capital market by issue of bonds directly on
private placement basis as well as through long term loans. In order to
tap the lower interest rates prevalent in the international as well as
domestic markets, Foreign loans amounting to approximately GBP 33
million and domestic loans amounting to Rs.250 crore were refinanced
during the financial year 2002-03 resulting in net savings of about
Rs.37 crore in the interest outgo during the residual life of the
loans.

Following up on the refinancing initiative, Govt loans amounting to Rs.
699 crore have been refinanced in July, 2003 by raising bonds directly
from the domestic capital market on private placement basis at
competitive interest rate resulting in savings of Rs. 235 crore in the
interest outgo during the residual life of the loans.

Commercial Effectiveness

The outstanding dues of CPSUs in power sector were securitised in line
with Alhuwalia Committee Report by signing the Tripartite Agreement.
This should facilitate liquidation of past dues and timely payment of
the current dues. In pursuance of the above, a total amount of Rs.
2029.77 crore (including a Surcharge of Rs. 161.37 crore) have been
reconciled with all the States for issuance of bonds by RBI under
securitisation scheme to settle all the old outstanding dues up to
30.09.2001. Twenty Seven States have signed the Tri-partite agreement
against which Rs. 1833.96 crore (including a Surcharge of Rs. 115.38
crore) stands covered for issuance of bonds. Remaining two States shall
be signing the Agreement shortly. Out of the twenty seven states, who
have signed the agreement, twenty

six States have already signed notification and authorised RBI to issue
the bonds. In 1 st phase, the bonds related to 17 States amounting to
Rs 1274.38 crore have been received on 1st September, 2003 and Bonds
from the other nine States are also being received shortly.

Based on the all round performance during F.Y 2002- 03, POWERGRID Is
once again poised to achieve the highest rating i.e. "Excellent" under
the MoU signed with Ministry of Power.

National Grid

In line with the plan to establish an integrated National Power Grid in
the country by the year 2012 with inter- regional power transfer
capacity of 30,000 MW various inter-regional transmission schemes were
undertaken.

The first phase of National Grid has been accomplished with
commissioning of Sasaram HVDC B/B Project in Sept, 2002, 3 months ahead
of schedule and at a cost lesser by Rs. 75 crore from the Government
approved cost. Capacity addition for the second phase of National Grid
has also commenced in F.y. 2002-03, with commissioning of 2000 MW
Talcher-Kolar HVDC bipole link in September, 2002 and 400 kV D/C
Raipur- Rourkela link in Mar03, enhancing inter-regional transfer
capacity to 8000 MW from almost non-existent level five years ago. The
implementation of 2000 MW, 1400 kms. long Talcher- Kolar HVDC project
has the distinction of being the longest HVDC bipole link in Asia.
This project was not only commissioned 9 months ahead of schedule but
also at a cost, which is Rs. 700 crore less than the Govt. approved
cost of Rs. 3,865 crore. Completion of Raipur-Rourkela 400 kV D/C AC
interconnection between Eastern and Western Region has led to creation
of a synchronised regional grid covering North-Eastern /Eastern/Western
Regions with a total installed capacity of more than 50,000 MW
stretching from Arunachal Pradesh in North Eastern Region to Goa in
Western Region, traversing a distance of more- than 2500 Kms.

As a result of the above endeavours, during the year 2002-03, POWERGRID
facilitated inter- regional power transfer of 13,000 MU valued at Rs.
2000 crore, about 40% higher compared to that achieved during FY 2001
-02. This power would have remained bottled up without the facilities
created by POWERGRID. The power transfer has taken place mostly from
power surplus Eastern Region to other power deficit regions. This has
helped exporting region by way of reduced charges and importing region
by mitigating the power shortage. Thus enhancement of inter-regional
power transfer added huge economic value.

Encouraging Grid Discipline

Close on the heels of commissioning of Northern Region and Southern
Region ULDC schemes, POWERGRID has test-charged the North-Eastern
Region ULDC scheme during F.Y 2002-03. These complex projects involving
the state-of-the-art technology have resulted in real time monitoring
and control of the grid to enhance its reliability, stability, and
security. Further, POWERGRID, in its efforts to ensure delivery of
quality power and to encourage healthy grid behaviour, facilitated
implementation of Availability Based Tariff (ABT) in all the regions
viz. Western Region w.e.f. 1.7.2002, Northern Region w.e.f. 1.12.2002,
Southern Region w.e.f. 1.1.2003 and Eastern Region w.e.f. 1.4.2003. ABT
has a built in commercial mechanism, to reward proper grid behavior
Commissioning of ULDC and implementation of ABT has significantly
improved the vital grid parameter like grid frequency, which was
hovering between 48 Hz and 52 Hz most of the time in the previous
years, is now generally within the specified band of 49.0 Hz to 50.5
Hz. The voltage profile has also improved. Such improvement has not
only increased life expectancy of the equipment

involved in power generation/Transmission/distribution but also of
electricity driven equipments/ appliances at consumers end.
Implementation of ABT has also facilitated reduction in cost of
delivered power through merit order dispatch.

New Initiatives

Projects

In line with the companys ambitious expansion plan, new projects,
worth about Rs. 3700 crore, have been taken up for implementation in
year 2002-03, which include, System strengthening in ER & NR, Series
Compensation on Raipur-Rourkela Line, Transmission System associated
with Chamera-ll Hydro-Electric Project (HEP), Tala-Siliguri
Transmission System, Transmission System associated with Dulhasti HEP,
Series Compensation on Nagarjuna Sagar-Cuddapah & Gooty-Neelamangala
400 kV line, Transmission System associated with Extension of Tarapur
Atomic Power Plant, Transmission System associated with Rihand-ll Super
Thermal Power Project and Telecom Diversification projects.

In Pursuit of Latest Technology

Keeping pace with the advancement of technology in the sector elsewhere
in the world, POWERGRID has attached prime importance to Technology
upgradation. It is working in collaboration with research institutions,
academic institutions and manufacturers, and is thus enhancing its
in-house capabilities for design and engineering of state-of-the-art
transmission systems. It has accorded major thrust in technologies like
Flexible AC Transmission System (FACTS), High Temperature Endurance
Conductors, Compact Towers, alternate type of tower structures like
Guyed Structures, Pole Structures etc. In the field of operation and
maintenance, POWERGRID is employing upto date technologies like Hot
Line maintenance, Hot line washing, Tuning of Power System Stabilizer
(PSS), Removal of closing resistors in the Circuit Breakers, Equipment
Condition Monitoring and Residual life Assessment etc to improve the
reliability, availability and security of transmission system.

Strategic Alliance

Facilitating infusion of Private capital

JV Route

POWERGRID, in its attempts to encourage private participation in the
transmission sector has joined hands with private player, Tata Power
for implementation of major transmission lines associated with Tala HEP
in Bhutan, costing about Rs. 1,100 crore. The project with route
length of around 1200 Kms. covers high capacity transmission lines from
Siliguri (West Bengal) to Mandola (Uttar Pradesh) near Delhi
constituting a major inter-regional component under second plan of
National Grid. Kicking off the Joint venture, Tata Power has already
picked up the 51 % stake in the Shell Company viz. Tala - Delhi
Transmission Limited. This shall be for the first time in the history
of Indian Power System that power transmission line shall be built with
private participation. Further, such a JV shall pave the way for more
such JVs thereby supplementing POWERGRIDs resources and efforts and
facilitate MOPs initiative for private sector participation.

IPTC route

In addition to JV route, POWERGRID had also identified 400 KV D/C
Bina-Nagda- Dehgam Transmission line with an estimated cost of about
Rs. 450 crore as the pilot project for implementation by an Independent
Power Transmission Company, which shall be privately wholly owned.
Evaluation of the proposals submitted by the bidder (only one bidder)
is underway. This process is being carried out under regulatory
supervision.

Consultancy Business

There was a quantum jump this year in booking consultancy assignments
and revenue realisation besides assisting SEBs. POWERGRID has secured
27 new consultancy assignments with a consultancy fee component of more
than Rs. 155 crore, which shall accrue over a period of three years.
The corresponding project cost is more than Rs. 1,200 crore.

Some of the major assignments include turnkey execution of 400KV D/C
Vishnuprayag - Muzaffarnagar Transmission system with an estimated
project cost of Rs. 323 crore on behalf of UPPCL, turnkey execution of
various sub-transmission improvement projects in the State of Bihar, IT
consultancy project for Delhi Transco.

POWERGRID could also make international foray by booking first
international consultancy order from M/s Bhutan Telecom for turnkey
execution of Optical Fibre Ground Wire and associated terminal
equipments on the existing lines in Bhutan and technical consultancy
for execution of National Load Despatch Centre in Bhutan.

Capitalisms on New Business opportunities

Convergence with Telecom

To strengthen its position in the competitive telecom business,
POWERGRID commissioned Delhi-Lucknow-Mumbai telecom link (2,600 Kms.)
in a record time of 9 months. The Delhi-Lucknow-Mumbai telecom link was
inaugurated by Honble Prime Minister at Lucknow through Video
Conferencing with Honble Chief Minister of Delhi on Delhi side and
Honble Govenor of Maharashtra on Mumbai end. Agreements were signed
with leading telecom players like VSNL, Data Access, Daksh, Convergys,
Bharti Telenet, Spectranet, Wipro Spectramind etc for using POWERGRIDs
telecom network. With few links, the company generated revenue of
about Rs. 8.3 crore from its telecom operation during F.Y 2002-03.

A major boost to POWERGRIDs Telecom venture has been received with the
GOI approval for the implementation of POWERGRIDs nationwide telecom
network of about 14000 Kms. at an estimated cost of Rs. 934 crore. This
network shall be operational by the year 2004 and shall interconnect
about 60 cities including all the State capitals.

Contributing to Distribution Reforms under APDRP

Under Accelerated Power Development & Reforms Program (APDRP) of
Ministry of Power, POWERGRID has been assigned the role of
Advisor-cum-Consultant (AcC) to lend its managerial and technical
expertise for developing 105 Distribution Circles. This includes 37
Circles, where POWERGRID has a direct role and in the remaining Circles
which are being developed by NPC, WAPCOS, ERDA and SEBs, the company is
acting as the co-ordinator. At the end of the first phase of the APDRP
Program, projects worth Rs. 16,000 crore have been approved, which
includes the projects worth Rs. 5587 crore, where POWERGRID is
associated.

In addition, POWERGRID has also undertaken implementation of projects
under APDRP on turnkey and bilateral basis in the States like Goa &
Bihar. Major projects taken up for implementation are Renovation and
Modernisation of Distribution systems in the circles

of PESU (East), Patna and Muzaffarpur in Bihar and North Goa,
implementation of Rural Electrification Schemes in about 2600 villages
in the districts of Vaishali and Muzaffarpur in Bihar.

Leveraging Human Capital to achieve excellence

POWERGRID believes that its human resource consisting of about 7000
employees is the most important asset and accordingly, its policies are
focused on development of human potential through skill upgradation,
career enhancement and job rotation to achieve organisational
objectives. An effective work culture has been established in the
organisation through empowerment, transparency, decentralisation and
innovative practice of participative management through Open House
interaction. POWERGRIDs growing productivity through an average
annual growth of about 44% in the asset base of the company is
witnessed with a manpower growth of only about 2.4% per annum.

Human Resource Development (HRD) is considered as a strategic function
in POWERGRID. During the year, the company has designed and executed
business aligned management development, technical training and
competency enhancement programmes on its own and also in collaboration
with reputed management development institutes such as IIMs, XLRI,
ASCI, MDI and technical training institutes that include NTs, NPTI,
Hotline Training Center. The company imparted training to 1602
employees during financial year 2002-03, surpassing the MoU target of
1,500.

Providing significant improvement in the quality of work environment,
POWERGRID established a state-of-the-art Corporate Office building
named "Saudamini" in Gurgaon near Delhi with modern features like
Automated Controls, Rain Water Harvesting and Outdoor Lighting using
Solar Energy etc. Further, to maintain nutritional standards, a dining
facility has been created which is common for all the levels of
employees including the Board Members. Thus, it is also facilitating in
building up a sense of brotherhood and belongingness.

Implementation of Rajbhasha

In pursuance of Govt. of Indias policy to promote extensive use of
Rajbhasha in the corporation, POWERGRID has notified in the gazette for
using Hindi in all its official works. During the year, the
Parliamentary Committee on Rajbhasha visited various establishments of
the corporation and found implementation of Rajbhasha to be highly
satisfactory. The efforts made by POWERGRID in promoting the
implementation of Rajbhasha have been applauded in many forums, which
is reflected in POWERGRID bagging the Rajbhasha Shield of Ministry of
Power. About 400 employees have been imparted training in subjects

related to Rajbhasha and a large number of employees have been imparted
training in Hindi software.

E-Governance

POWERGRID is systematically developing competency to deploy Information
Technology for efficient and effective discharge of its functions. Some
of the salient achievements are Web based Enterprise wide Information
Portal as a step towards E-Governance, State-of-the-Art Multi
Locational Video Conferencing System, Inspection Management System on
internet based B2B platform and Enterprise wide Converged IT and
Communication System. The Video Conferencing is utilised extensively
for various meetings and follow up actions leading to substantial
monetary savings and curtailing travelling time of senior executives.

Management of Environmental and Social Issues

Creating Sustainable Corporate Values

POWERGRID, being in the infrastructure sector, is in enviable position
to directly contribute to the society. Power, today drives all the
economic activities in the society. POWERGRID, as the provider of
inter-state transmission facilities and as operator of the countrywide
electrical grids, has a pivotal role in countrys power sector.

The sustainability of corporate values is proven by the fact that they
are in consonance with the values cherished by the society. The
objectives of the company are in alignment with the requirements of its
stakeholders. End results of such value system are witnessed in
all-round performance of the company, which has surpassed the targets.
The company continues to make conscious efforts not only for sustaining
such value-system but also inculcating desirable values.

Concern for Environment

Impact of POWERGRIDs business on environmental degradation is almost
negligible, however, it believes that conservation and management of
the environment has to remain the integral and essential part of
economic development. Following the well established principles of
environmental management, POWERGRID has evolved its own Environmental
and Social Policy & Procedures (ESPP) in consultation with a wide
section of people to take ample care of environmental and social issues
arising out of its activities. This ESPP document, which has been
inducted for application in all of its projects, helps to address all
environmental and social issues at appropriate time and in appropriate
manner.

POWERGRID has been successfully implementing the ESPP through in-house
designing of Rehabilitation Action Plan (RAP) and Environment
Assessment Management Plan (EAMP). All projects were implemented
according to these plans. These plans are executed at site and
monitored

not only at the highest level of the hierarchy but also by multilateral
funding agencies like WB & ADB.

Emergency Restoration

POWERGRID, in conscious endeavours to discharge its broader social
responsibilities, has taken many steps which include faster restoration
of transmission system belonging to State utilities which are damaged
during Natural calamities like flood, earthquake, cyclones, etc

Citizens charter

POWERGRID formulated its Citizens Charter providing a visible front of
its objectives, mission, commitments, terms of service and its
obligation to the stakeholders. This is also intended to provide all
information on schemes, plans and practices to users outside the
organisation as well as information about accessing the services.

Social justice

The Corporation has faithfully implemented the Govt. directives to take
care of the interests of Scheduled Castes, Scheduled Tribes and other
Backward Classes. For monitoring the same, POWERGRID has nominated
Liaison Officers in the Corporate Centre and Regional Establishments.
Appropriate funds have been earmarked for the welfare of the SC/ST
community and a number of welfare schemes have been implemented in the
SC/ST populated villages near its establishments.

Remaining Vigilant

In its continuous efforts towards bringing about total transparency in
management, POWERGRID has gone ahead to promote the culture of zero
tolerance. As a part of this effort, POWERGRID has tried to ensure
speedy disposal of disciplinary cases by appointing Inquiry Officers
from the panel approved by the CVC and by conducting regular and
surprise inspections at regular intervals. The Organization received
about 42 complaints during the year, out of which 21 complaints were
taken up for investigation. Investigations were completed in 19 cases.
On the preventive side, 69 inspections were conducted. The CTEs
organisation also conducted 5 intensive examinations of the major works
of POWERGRID.

In order to create an environment conducive to vigilance activities,
significant achievement was made by involving senior management in
preventive anti-corruption work. As a part of this effort, a workshop
was organised in the Corporate Center in collaboration with IIM,
Kolkata on "Ethics and business values", in which about 30 executives
from the middle management level participated. Besides this, workshops
were organised in the Regions on ethics and vigilance, for about 125
non-vigilance Executives.

As a part of its social responsibility, POWERGRID also organised
one-act play competition, thematic lectures by eminent personalities,
debates, essay and slogan competition on the occasion of the Vigilance
Awareness Week.

Particulars of Employees:

The particulars of employees of the Corporation who were in receipt of
remuneration in excess of the limit prescribed under Section 217 (2A)
of the Companies Act, 1956 is given in Annexure-I to this Report.

As regards the requirements of the disclosures under Section 217(1) (e)
of the Companies Act, 1956 read with Rule 2 of the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules,
1988 relating to conservation of energy, technology absorption and
foreign exchange earnings and outgo, information is is given in
Annexure-ll to this Report.

Comptroller and Auditor Generals comments:

Review of the accounts for the year ended 31st March, 2003 by the
Comptroller and Auditor General of India under Section 619 (4) of the
Companies Act, 1956 along with Directors comments on the points raised
by the C&AG given in Annexure-lll to this report.

Corporate Governance

As per clause 49 of the Listing Agreement, a report on the Corporate
Governance, forming part of this report, together with the Auditors
Certificate regarding the compliance of the Corporate Governance are
given in Annexure-IV to this report.

POWERGRIDs Board

During the year, a number of changes took place in the constitution of
the Board of Directors. Shri U.C.Misra assumed the charge as Director
(Personnel) POWERGRID w.e.f. 1.8.2002 in place of Shri A.I.Bunet who
superannuated on 31.07.2002. The Board gratefully acknowledges the
invaluable contribution and guidance received from him during his
tenure with POWERGRID. Shri A.K.Kutty, JS, MOP and Shri M.Sahoo, JS&FA,
MOP joined the Board of POWERGRID w.e.f. 22.7.2002 vice Shri
P.I.Suvrathan and Shri R.Ramanujam respectively. Shri V.V.R.K.Rao
Member, (G.O.), CEA ceased to be a Director on attaining the age of
superannuation w.e.f. 30.06.2002. Shri Shashi Shekhar, JS, MOP joined
the Board of POWERGRID w.e.f. 17.6.2003 in place of Shri A.K.Kutty, JS,
MOP who ceased to be a Director of POWERGRID Board. The Board of
Directors also place on record its deep appreciation for the
contribution and guidance received from S/Shri V.V.R.K.Rao,
R.Ramanujam, P.I.Suvrathan and A.K.Kutty. Appointment of non-official
part- time Directors whose place fell vacant on 26.7.2001 is awaited.

Acknowledgements

The Directors place on record their grateful thanks for the guidance
and cooperation extended all through by Ministry of Power, Central
Electricity Authority, Ministry of Home Affairs, Central Electricity
Regulatory Commission, Dept. of Economic Affairs, Ministry of Finance,
Planning Commission and other concerned Govt. departments/agencies at
the Central and State level without whose active support, the
achievements by the Corporation during the year under review would not
have been possible. Moreover, the Board extends its sincere thanks to
the customers of the corporation, the State Electricity Boards/
Corporations for their endeavour to pay the transmission charges in
spite of their financial hardships.

The Directors take this opportunity to thank the Principal Director of
Commercial Audit and Ex-Officio Member Audit Board-Ill for the
cooperation during the year. Your Directors also acknowledge the
valuable suggestions and guidance received from the statutory auditors
viz. M/s. Hingorani M & Co., M/s. Venugopal & Chenoy and M/s D.R Sen &
Co. during the audit of accounts of the company for the year under
review.

Your Directors further wish to place on record their sincere thanks to
the various national/ international Financial Institutions/Banks/Credit
Rating Agencies for the continued trust and confidence reposed by them
by rendering the continuous timely assistance and patronage for
successful implementation of the various projects by the company.

Last but not the least, the Board of Directors place on record the
valuable contribution and appreciation for the support and the
cooperation extended by each member of the POWERGRID family in the
affairs of the company.